• What is the current foreign currency liquidity status of Korean financial institutions and its outlook?

  • Since the 1997 Asian financial crisis, the Korean government has strictly regulated foreign currency liquidity of domestic banks.

    Thanks to such strict regulation, domestic banks have maintained sound repayment capacities even after the fall of Lehman Brothers. For example, their foreign currency liquidity ratios exceed the guidance ratio.

    Unit: trillion won, %
    (%) End-Aug. End-Sep. End-Oct. End-Nov. End-Dec. Jan. 21 Jan. 22 Jan. 23
    Foreign currency liquidity ratio (กร85%) 100.6 101.1 100.0 97.6 99.2 100.3 100.0 100.1
    1 month gap ratio (กรกโ10%) 0.7 1.3 0.7 0.1 0.8 1.1 1.5 1.9

    Note : numbers since end-Oct. are preliminary figures

    Given the tightened external financing conditions stemming from the global financial turmoil, however, further action is necessary to minimize the related negative effects on the real economy.

    The government has therefore continued to take a range of preemptive measures, such as providing foreign currency liquidity , arranging a package of foreign currency payment guarantees for domestic banks, and signing currency swap agreements with the U.S., Japan, and China (USD 30 billion, each)

    Although domestic banks have faced difficulties in borrowing in foreign currency due to expansion of global credit crunch, their lending conditions have improved to some extent, as demonstrated by the fact that Korea became

    11As of the end of 2008, the government and the Bank of Korea had injected USD 48.1 billion of liquidity into banks through rediscounting export bills of exchange, lending, and swap transactions

    the first Asian country to issue public bonds abroad since the Lehman Brothers bankruptcy.

    In January, the Export-Import Bank of Korea and the Korea Development Bank successfully issued public bonds worth two billion dollars each, the largest amount since the government issuance of foreign exchange stabilization bond worth four billion dollars in 1998.

    < Current Public Bond Issuance Status >

    Issued by Date Maturity Amount Interest Rate Investors
    Export-Import Bank of Korea Jan.13 5 years $ 2 billion 8.125(Libor+625) Asia 30%, Europe 16%, US 54%
    Korea Development Bank Jan.17 5 years $ 2 billion 8.212 (Libor+615) Asia 47%, Europe 19%, US 34%

    Korean banks will continue to maintain healthy foreign currency liquidity based on the government's continued efforts to closely monitor market conditions and thoroughly prepare for possible problems.

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