Banks in S.Korea increase foreign debts despite uncertainties
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E-mail Xinhua, July 17, 2013
Banks in South Korea increased foreign debts successfully last month despite mounting external uncertainties such as the possibility for an early U.S. exit, financial watchdog data showed Wednesday.
The rollover rate of short-term external debts with a maturity of less than one year at 16 domestic banks came in at 110.5 percent in June, staying around the monthly average of 113.1 percent in 2013, according to the Financial Supervisory Service ( FSS).
The rollover rate gauges the percentage of fresh overseas borrowing against foreign debts that mature within the month. The rate above 100 percent means lenders refinance maturing debts rather than repay them.
The refinancing rate of long-term external liabilities that mature in one year or more at 12 local banks, excluding regional banks, reached 132.8 percent in June, higher than this year's average monthly rate of 127.7 percent.
Domestic banks continued to reduce their dependence on short- term foreign debts by securing long-term foreign currency liquidity in preparation for the potential external shocks.
Volatility in global financial markets deepened after Federal Reserve Chairman Ben Bernanke hinted in June at an early end of its bond purchasing program, but local banks borrowed foreign currency liquidity successfully despite such uncertainties, the watchdog said.
Funding conditions were relatively favorable to local banks. Spread on credit default swap (CDS) for the country's dollar- denominated sovereign bonds fell to 91 basis points as of the end of June after surging to this year's high of 117 basis points on June 24.
Weighted average spread on banks' foreign debts with a maturity of less than one year edged up 0.1 basis point to 9.6 basis points last month, but those for one- and five-year debts declined 2 basis points and 43 basis points respectively.
Foreign currency soundness exceeded their recommended levels. The three-month foreign currency liquidity ratio, a barometer of banks' foreign liquidity healthiness, was 107.8 percent as of end- June, topping the recommended level of 85 percent.
The ratio is calculated by dividing liquid foreign assets that mature within three months by liquid foreign liabilities with a maturity of less than three months.
Both one-month and seven-day mismatch ratios stayed above the recommended level of minus 10 percent and minus 3 percent in June. The ratios stood at 2.2 percent and 2.1 percent each last month. Enditem
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