S. Korea has no reason to panic on default woes in Europe: minister

(ATTN: ADDS Bahk's remarks during int'l conference in last 4 paras) SEOUL, Sept. 15 (Yonhap) -- South Korea has no reason to panic on the increased volatility in the global financial markets gripped by the growing default concerns over Greece's debt, the nation's top economic policymaker said Thursday. "Basically, our economy remains in good condition, and given our fiscal health, foreign reserves, short-term borrowing and foreign capital conditions, I think that there is little reason to have excessive concerns," Finance Minister Bahk Jae-wan said in an economic policy coordination meeting. "Still, there is a chance that the global fiscal crisis could be prolonged ... We will keep tabs on local and overseas financial markets, while seeking global coordination and improving our economic fundamentals," Bahk added. His remarks come after South Korea's stocks and currency markets tumbled Wednesday on the news that Moody's Investors Service cut its credit ratings on two major French banks -- Credit Agricole SA and Societe Generale SA -- by one notch each, citing their exposure to Greece. The government was quick to soothe market jitters here, saying that the credit downgrade will have a "limited" impact on South Korea as its banks' exposure to the two French lenders remain quite small. According to the Financial Supervisory Service, South Korean banks' borrowing from the two French lenders amounted to US$510 million as of the end of May, which makes up just 0.4 percent of their total external loan exposure. South Korea's foreign exchange reserves rose to a fresh record high of $312.19 billion at the end of August, up 1.16 billion from the previous month, the central bank said earlier. Its economy, however, appears to be losing its recovery momentum in recent months as trade conditions in major export markets have been deteriorating. Finance Minister Bahk earlier hinted that he could lower the government's 4.5 percent growth projection for this year in the near future. During an international conference held in Seoul, Bahk also cautioned against taking additional measures to keep a lid on excessive capital flows. Instead, he called for stepped-up efforts to strengthen a financial safety net through global coordination. Hot money is cited as the main reason for market turbulence and swings in the financial market here, which experts worry could jeopardize the nation's economy and financial system despite their solid fundamentals. "We should be very careful to determine whether it is possible to introduce additional regulations," Bahk said. "We could think about diverse measures but I think it is not that desirable at this moment." The minister said that the government has been introducing a series of measures including a bank levy and restriction on currency forwards holdings. He noted that they have been "successful" in curbing excessive capital movements.