Local banks' short-term foreign borrowing up in May

SEOUL, June 13 (Yonhap) -- South Korean banks' short-term foreign borrowing rose in May, but overall foreign currency liquidity conditions remained stable despite the eurozone sovereign crisis, the financial watchdog said Monday.
A total of 16 local banks refinanced 94.9 percent of their maturing foreign debt through fresh borrowing in May, up from 63.2 percent seen in the previous month, according to the Financial Supervisory Service (FSS).
A bank's short-term refinancing rate measures the percentage of its new borrowing against foreign currency debts that mature in one year or less. In March, the refinancing rate stood at 121.6 percent as local banks rushed to borrow from overseas due to jitters from Japan's quake.
The watchdog said although the short-term refinancing rate jumped in May compared with April, the size of local banks' short-term borrowing did not seem to be abnormal despite renewed concerns about the eurozone debt crisis.
"Given the costs of insuring South Korea's sovereign bonds against default remained stable in May, local banks' foreign currency borrowing conditions were not bad," said an official at the FSS.
The spread on credit default swaps (CDSs) for South Korea's dollar-denominated currency stabilization bonds reached 97 basis points at the end of May, compared with 95 basis points the previous month. A basis point is 0.01 percentage point.
The spread on CDSs reflects the cost of hedging credit risks on corporate or sovereign debt.
The FSS said it will closely monitor banks' FX liquidity conditions to brace for potential market volatility ahead of a planned end of the Federal Reserve's bond-buying program.
sooyeon@yna.co.kr