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183979
Tue, 05/24/2011 - 07:37
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https://oananews.org//node/183979
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S. Korea's short-term external debt jumps in Q1
SEOUL (Yonhap) - South Korea's short-term foreign debt rose by the largest amount in over two years in the first quarter as local branches of foreign banks heavily increased overseas borrowing, the central bank said Tuesday.
South Korea's short-term overseas debt stood at US$146.7 billion as of the end of March, up $11.7 billion from three months earlier, according to the Bank of Korea (BOK).
It marked the sharpest quarterly growth since a $12.8 billion gain registered in the third quarter of 2008. The country's total external debt stood at a record $381.9 billion as of end-March, up $21.9 billion from the previous quarter and the largest increase since the first quarter of 2008.
"The country's short-term external debt jumped last quarter mainly because local branches of foreign banks increased borrowing from overseas to handle foreign exchange forwards deals," said Yu Byung-hoon, a BOK official.
According to the BOK, short-term foreign debt held by foreign bank branches stood at $66.5 billion as of the end of March, up $8.2 billion from three months earlier.
A sharp rise in the country's short-term external debt prompted the government to unveil its plan to lower the ceiling of foreign exchange derivatives positions held by local and foreign banks by 20 percent.
South Korea said on Thursday that the government plans to restrict the amount of currency forwards held by foreign bank branches to 200 percent of their equity capital from the current 250 percent. The ceiling for Korean banks will be lowered to 40 percent from 50 percent.
Last year, South Korea took a similar step to curb banks' FX derivatives positions, leading the country's short-term overseas debt to decrease in the fourth quarter. But such debt has begun to sharply rise since this year as offshore investors have excessively unloaded dollar forwards amid the economic recovery and the local currency's gain.
A rise in short-term borrowing can become a source of concerns as a surge in foreign debt left local banks vulnerable to external shocks at the height of the global financial crisis. In a related move, South Korea plans to impose a levy on banks' non-deposit foreign currency borrowings starting in August.
The ratio of short-term foreign debt, measured by the percentage of short-term overseas borrowing against the foreign reserves, reached 49.1 percent as of end-March, up from 46.3 percent from the preceding quarter.
Yu said despite a rise in short-term external debt, the country's capacity to service debt remains sound, given widening foreign exchange reserves.
Meanwhile, South Korea's net external credit reached $84.1 billion as of the end of March, down $4.2 billion from three months earlier, the BOK noted.
Foreign investment in South Korea rose in the first quarter mainly because overseas borrowing by lenders jumped and the stock market's bull run and the won's ascent to the dollar raised the value of foreigners' shareholdings.
Outstanding foreign investment, including securities investment, stood at $866.8 billion as of end-March, up $41.8 billion from the previous quarter, it added.
South Korea's short-term overseas debt stood at US$146.7 billion as of the end of March, up $11.7 billion from three months earlier, according to the Bank of Korea (BOK).
It marked the sharpest quarterly growth since a $12.8 billion gain registered in the third quarter of 2008. The country's total external debt stood at a record $381.9 billion as of end-March, up $21.9 billion from the previous quarter and the largest increase since the first quarter of 2008.
"The country's short-term external debt jumped last quarter mainly because local branches of foreign banks increased borrowing from overseas to handle foreign exchange forwards deals," said Yu Byung-hoon, a BOK official.
According to the BOK, short-term foreign debt held by foreign bank branches stood at $66.5 billion as of the end of March, up $8.2 billion from three months earlier.
A sharp rise in the country's short-term external debt prompted the government to unveil its plan to lower the ceiling of foreign exchange derivatives positions held by local and foreign banks by 20 percent.
South Korea said on Thursday that the government plans to restrict the amount of currency forwards held by foreign bank branches to 200 percent of their equity capital from the current 250 percent. The ceiling for Korean banks will be lowered to 40 percent from 50 percent.
Last year, South Korea took a similar step to curb banks' FX derivatives positions, leading the country's short-term overseas debt to decrease in the fourth quarter. But such debt has begun to sharply rise since this year as offshore investors have excessively unloaded dollar forwards amid the economic recovery and the local currency's gain.
A rise in short-term borrowing can become a source of concerns as a surge in foreign debt left local banks vulnerable to external shocks at the height of the global financial crisis. In a related move, South Korea plans to impose a levy on banks' non-deposit foreign currency borrowings starting in August.
The ratio of short-term foreign debt, measured by the percentage of short-term overseas borrowing against the foreign reserves, reached 49.1 percent as of end-March, up from 46.3 percent from the preceding quarter.
Yu said despite a rise in short-term external debt, the country's capacity to service debt remains sound, given widening foreign exchange reserves.
Meanwhile, South Korea's net external credit reached $84.1 billion as of the end of March, down $4.2 billion from three months earlier, the BOK noted.
Foreign investment in South Korea rose in the first quarter mainly because overseas borrowing by lenders jumped and the stock market's bull run and the won's ascent to the dollar raised the value of foreigners' shareholdings.
Outstanding foreign investment, including securities investment, stood at $866.8 billion as of end-March, up $41.8 billion from the previous quarter, it added.
