Nervous lenders go borrowing abroad

Korean banks’ mid- and long-term overseas borrowing jumped in January as lenders secured foreign currency liquidity to brace against a possible deterioration in external conditions, the financial watchdog said yesterday.

The refinancing rate of 12 local banks’ mid- and long-term foreign debts came to 382.2 percent at the end of last month, up from 174.4 percent in December, according to the Financial Supervisory Service (FSS).

The rollover rate gauges the percentage of fresh overseas borrowing against foreign debts that mature after one year. A refinancing rate of more than 100 percent indicates local lenders have acquired more fresh foreign loans rather than refinancing their maturing foreign debts.

A total of 16 local banks refinanced 90.3 percent of their maturing short-term foreign debts through fresh borrowing last month, compared with 120.3 percent in December, it added.

“Domestic banks expanded long-term foreign currency borrowings to get ready for a deterioration of external conditions and repaid short-term loans that matured with already secured long-term funds,” the regulator said in a release.

Meanwhile, the FSS said circumstances for securing foreign liquidity improved last month on the back of easing concerns over the euro zone debt crisis.

The spread on credit default swaps (CDSs) for Korea’s five-year treasury bonds reached 150 basis points as of the end of January, slipping 11 basis points from the previous month. A lower CDS premium indicates a country is less likely to go belly-up. A basis point is 0.01 percentage point.

The regulator said it plans to induce lenders to secure foreign liquidity amid concerns the euro zone debt crisis may persist. Yonhap