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S.Korean banks repay foreign debts in June

07-12-2012 10:27 BJT

SEOUL, July 12 (Xinhua) -- South Korean banks repaid foreign debts last month as local lenders held sufficient foreign currency liquidity secured in advance through long-term borrowing, the financial watchdog said Thursday.

The rollover rate of short-term foreign debts with a maturity of less than one year at 16 local banks came in at 86.7 percent in June, according to the Financial Supervisory Service ( FSS).

The rollover rate gauges the percentage of fresh borrowing from overseas against foreign debts that mature within the month. The rate below 100 percent means local lenders repaid maturing debts rather than refinancing them.

Domestic banks continued to reduce their short-term foreign borrowing in 2012 by securing long-term foreign currency liquidity earlier in preparation for the potential external shocks.

The refinancing rate of long-term external debts that mature in one year or more at 12 domestic banks, excluding regional banks, reached 77.0 percent in June, according to the FSS. The figure was down from a 249.9 percent in May.

Foreign currency funding conditions for local lenders improved last month thanks to easing concerns over Europe's debt crisis following the European leaders' agreement on aid for banks and the Greek election where the pro-austerity party won.

The spread on credit default swap (CDS) for the South Korea' s dollar-denominated sovereign debts that mature in five years came in at 123 basis points (bps) as of the end of June, down 19 bps from a month before.

Weighted average spread on local banks' foreign borrowing with a maturity of less than one year gained 8.5 bps on-month to 25.6 bps in June, but the spread on foreign debts that mature in one year dropped 19 bps to 93 bps. The figure for five-year foreign debts jumped 55 bps to 220 bps last month as lenders with relatively low credit rushed to issue bonds, said the FSS.

Local banks' foreign currency soundness numbers exceeded their recommended levels. The 3-month foreign currency liquidity ratio, a barometer of banks' foreign liquidity health, stood at 108.3 percent as of end-June, breaching the recommended level of 85 percent.

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

Both 1-month and 7-day mismatch ratios stayed above the recommended level of minus 10 percent and minus 3 percent in June. The ratios stood at 2.0 percent and 1.9 percent each last month.

 

Editor:James |Source: Xinhua

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