ID :
210960
Tue, 10/04/2011 - 06:21
Auther :
Shortlink :
https://oananews.org//node/210960
The shortlink copeid
S. Korean banks face rising overseas funding costs
SEOUL (Yonhap) - South Korean lenders saw a surge in overseas borrowing costs due mainly to persistent external uncertainties that are sapping investor confidence in their European and U.S. counterparts, data showed Tuesday.
The spread on Korea Development Bank bonds that mature in 2016 reached 335 basis points as of Sept. 29, up 35 basis points from a week earlier, according to the data by the Korea Center for International Finance (KCIF).
The spread on Korea Export-Import Bank bonds that mature in 2015 jumped 25 basis points and the figure for Woori Bank bonds that are due in 2016 skyrocketed 55 basis points over the cited period.
A rise in local banks' bond spreads indicates higher funding costs in global financial markets. A basis point is 0.01 percentage points.
The average cost of insuring local banks' debt against default also trended higher. The average credit default swap (CDS) premium on seven local banks, including Kookmin and Woori, reached 258 basis points, up 100 basis points from the beginning of September.
The spread on CDS reflects the cost of hedging credit risks on corporate or sovereign debt. The recent steep rise indicates a deterioration in the creditworthiness of South Korean lenders.
Meanwhile, the CDS premium on South Korean government bonds hit a 29-month high of 226 basis points, marking the highest level since 227 basis points on May 4, 2009.
"The CDS premium of Morgan Stanley has soared to 583 basis points and the figure for Chinese lenders is also rising, which is worsening capital procurement conditions for local banks. If lenders face difficulty in procuring capital, it tends to impact the CDS premium on sovereign debts," said a KCIF official.
Another official, however, said the recent fear over U.S. financial giant Morgan Stanley seems to stem from the ongoing external uncertainties and is likely to have a smaller impact on local financial markets compared with the series of credit downgrades on U.S. and European banks last month.
In September, Moody's Investors Service cut its outlooks on Bank of America Corp., Citigroup Inc. and Wells Fargo & Co., while Standard & Poor's downgraded the ratings of seven Italian lenders.
The spread on Korea Development Bank bonds that mature in 2016 reached 335 basis points as of Sept. 29, up 35 basis points from a week earlier, according to the data by the Korea Center for International Finance (KCIF).
The spread on Korea Export-Import Bank bonds that mature in 2015 jumped 25 basis points and the figure for Woori Bank bonds that are due in 2016 skyrocketed 55 basis points over the cited period.
A rise in local banks' bond spreads indicates higher funding costs in global financial markets. A basis point is 0.01 percentage points.
The average cost of insuring local banks' debt against default also trended higher. The average credit default swap (CDS) premium on seven local banks, including Kookmin and Woori, reached 258 basis points, up 100 basis points from the beginning of September.
The spread on CDS reflects the cost of hedging credit risks on corporate or sovereign debt. The recent steep rise indicates a deterioration in the creditworthiness of South Korean lenders.
Meanwhile, the CDS premium on South Korean government bonds hit a 29-month high of 226 basis points, marking the highest level since 227 basis points on May 4, 2009.
"The CDS premium of Morgan Stanley has soared to 583 basis points and the figure for Chinese lenders is also rising, which is worsening capital procurement conditions for local banks. If lenders face difficulty in procuring capital, it tends to impact the CDS premium on sovereign debts," said a KCIF official.
Another official, however, said the recent fear over U.S. financial giant Morgan Stanley seems to stem from the ongoing external uncertainties and is likely to have a smaller impact on local financial markets compared with the series of credit downgrades on U.S. and European banks last month.
In September, Moody's Investors Service cut its outlooks on Bank of America Corp., Citigroup Inc. and Wells Fargo & Co., while Standard & Poor's downgraded the ratings of seven Italian lenders.
