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S. Korean banks' short-term foreign debts rise in May

06-13-2011 16:43 BJT

SEOUL, June 13 (Xinhua) -- South Korean banks' short-term foreign debts rose in May, but overall conditions for borrowing from overseas remained stable, its financial watchdog said Monday.

The rollover rate of short-term external debts with a maturity of one year or less at 16 domestic banks stood at 94.9 percent in May, up from 63.2 percent the previous month, the Financial Supervisory Service (FSS) said in a statement.

The rollover rate below 100 percent means local lenders paid back their maturing foreign debts rather than refinancing them. Local lenders stayed net paybacks in May for two months, but the amount of repayment narrowed sharply.

Rollover rate of long-term foreign debts maturing in one year or more at 12 local banks came in at 52.4 percent, sharply down from 130.3 percent in April, according to the FSS.

Conditions for foreign borrowing remained stable. The spread on credit default swaps (CDSs) for South Korea's dollar-denominated sovereign debts stood at 97 basis points in end-May, nearly unchanged from 95 basis points a month earlier.

The CDS spread reflects the cost of insuring sovereign bonds against default and traders use them to speculate on credit quality. A increase signals worsening perception of creditworthiness in the CDS market.

Weighted average spread on foreign borrowing with a maturity of more than one year declined to 82 basis points in May from 85 basis points the previous month, keeping its falling run since January, the FSS said.

Spread on short-term foreign borrowing jumped to 21.3 basis points last month from 14.6 basis points a month earlier, but it was mainly attributable to longer maturity.

Local banks' foreign currency soundness measures exceeded their recommended levels in May, according to the FSS.

The 3-month foreign currency liquidity ratio, a barometer of banks' foreign liquidity health, stood at 100.2 percent as of the end of May, breaching above the recommended level of 85 percent.

The ratio is calculated by dividing liquid foreign assets that mature within three months by liquid foreign liabilities with a maturity of less than three months.

Both 7-day and 1-month mismatch ratios came in at one percent and zero percent in May respectively, staying above the recommended level of minus three percent and minus 10 percent each.

Editor:Yang Jie |Source: Xinhua

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