ID :
200289
Wed, 08/10/2011 - 08:28
Auther :
Shortlink :
https://oananews.org//node/200289
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S. Korea to check banks' foreign currency liquidity
SEOUL, Aug. 10 (Yonhap) -- South Korea plans to conduct daily checks on local banks' foreign currency levels to stave off a liquidity crunch amid rising market volatility, officials said Wednesday.
The move comes on the heels of last week's downgrade of the U.S. credit rating, which has sent shock waves through the local financial market and spawned anxiety that local banks may face liquidity shortages.
"Financial authorities will keep close tabs on banks' foreign currency liquidity levels, which will help detect signs of trouble that is vital for preventing a liquidity shortage," the finance ministry said.
Overall the country's financial sector is not facing any difficulties, and banks' current foreign currency liquidity conditions remain good compared to right after the Lehman Brothers collapse in September 2008, the ministry said.
The plan was unveiled after an emergency meeting of officials from the ministry, Bank of Korea, the Financial Services Commission and its executive body the Financial Supervisory Service.
The ministry said that the amount of foreign currency that can be utilized by local banks on short notice has grown considerably in the past few years as lenders reduced their exposure.
In addition, the central government and financial regulators stressed that they must guard against overreaction to the latest developments and be ready to implement contingency plans to reduce concerns among foreign investors.
Related to efforts to make certain the country does not suffer from a liquidity crunch, local banks said they are moving to set up so-called committed lines with overseas financial institutions and non-financial sources so they can borrow money if an emergency situation arises.
A committed line obliges local banks to pay set interest to their foreign counterparts, but they are given precedence when borrowing money.
Shinhan Bank, the country's No. 3 lender, has set up a committed line that could allow it to borrow up to US$1 billion, with Export-Import Bank of Korea having a similar arrangement with a Japanese bank for $120 million.
In addition, lenders said they are moving to extend loans that are maturing to make certain they have enough foreign currency down the line.
The move comes on the heels of last week's downgrade of the U.S. credit rating, which has sent shock waves through the local financial market and spawned anxiety that local banks may face liquidity shortages.
"Financial authorities will keep close tabs on banks' foreign currency liquidity levels, which will help detect signs of trouble that is vital for preventing a liquidity shortage," the finance ministry said.
Overall the country's financial sector is not facing any difficulties, and banks' current foreign currency liquidity conditions remain good compared to right after the Lehman Brothers collapse in September 2008, the ministry said.
The plan was unveiled after an emergency meeting of officials from the ministry, Bank of Korea, the Financial Services Commission and its executive body the Financial Supervisory Service.
The ministry said that the amount of foreign currency that can be utilized by local banks on short notice has grown considerably in the past few years as lenders reduced their exposure.
In addition, the central government and financial regulators stressed that they must guard against overreaction to the latest developments and be ready to implement contingency plans to reduce concerns among foreign investors.
Related to efforts to make certain the country does not suffer from a liquidity crunch, local banks said they are moving to set up so-called committed lines with overseas financial institutions and non-financial sources so they can borrow money if an emergency situation arises.
A committed line obliges local banks to pay set interest to their foreign counterparts, but they are given precedence when borrowing money.
Shinhan Bank, the country's No. 3 lender, has set up a committed line that could allow it to borrow up to US$1 billion, with Export-Import Bank of Korea having a similar arrangement with a Japanese bank for $120 million.
In addition, lenders said they are moving to extend loans that are maturing to make certain they have enough foreign currency down the line.
