ID :
197217
Tue, 07/26/2011 - 09:31
Auther :
Shortlink :
https://oananews.org//node/197217
The shortlink copeid
Local banks asked to unveil FX liquidity contingency plans
SEOUL, July 26 (Yonhap) -- South Korea's financial watchdog has requested local banks to unveil their contingency plans to secure foreign currency liquidity for rainy days in an effort to cushion the country from a potential financial crisis, sources said Tuesday.
The Financial Services Commission (FSC), the financial regulator, and the Financial Supervisory Service, the FSC's executive body, have created a task force to look into the foreign currency liquidity condition facing 12 local banks.
According to sources, the FSC has requested the local banks submit their detailed plans on how to fund foreign currency liquidity when potential financial turmoil occurs, though their FX liquidity situations remain firm for now.
"If Korea draws up measures in advance to tackle potential jitters like advanced economies' fiscal woes, it can deal with the problems with composure when a crisis crops up," said an official at a regulatory authority.
The move comes as the country has learned the lesson of the importance of beefing up banks' foreign currency liquidity after experiencing the 1997-98 Asian-wide financial crisis and the global financial turmoil.
In the height of the global financial storm, Korean banks, saddled with high short-term debt, had difficulties in refinancing foreign currency loans or securing FX liquidity, as foreign capital fled the country en masse.
South Korea holds more than US$300 billion in foreign reserves and banks' overall foreign currency conditions are sound, but unexpected external shocks could have risks of leading the country to face another liquidity squeeze.
In a related move, South Korea is making efforts to smooth excessive cross-border capital movement as the country's financial markets and currency used to undergo high volatility whenever big external shocks occurred. The country has tightened regulations on banks' holdings of foreign currency derivatives and plans to impose a levy on bank's non-core borrowing starting in August.
FSC Chairman Kim Seok-dong has repeatedly warned banks, saying that the watchdog's top priority this year is making banks strengthen their FX liquidity conditions.
The Financial Services Commission (FSC), the financial regulator, and the Financial Supervisory Service, the FSC's executive body, have created a task force to look into the foreign currency liquidity condition facing 12 local banks.
According to sources, the FSC has requested the local banks submit their detailed plans on how to fund foreign currency liquidity when potential financial turmoil occurs, though their FX liquidity situations remain firm for now.
"If Korea draws up measures in advance to tackle potential jitters like advanced economies' fiscal woes, it can deal with the problems with composure when a crisis crops up," said an official at a regulatory authority.
The move comes as the country has learned the lesson of the importance of beefing up banks' foreign currency liquidity after experiencing the 1997-98 Asian-wide financial crisis and the global financial turmoil.
In the height of the global financial storm, Korean banks, saddled with high short-term debt, had difficulties in refinancing foreign currency loans or securing FX liquidity, as foreign capital fled the country en masse.
South Korea holds more than US$300 billion in foreign reserves and banks' overall foreign currency conditions are sound, but unexpected external shocks could have risks of leading the country to face another liquidity squeeze.
In a related move, South Korea is making efforts to smooth excessive cross-border capital movement as the country's financial markets and currency used to undergo high volatility whenever big external shocks occurred. The country has tightened regulations on banks' holdings of foreign currency derivatives and plans to impose a levy on bank's non-core borrowing starting in August.
FSC Chairman Kim Seok-dong has repeatedly warned banks, saying that the watchdog's top priority this year is making banks strengthen their FX liquidity conditions.
