S Korea's financial watchdog to toughen rules on banks' overseas borrowing
- Source: Xinhua
- [17:32 September 25 2009]
- Comments
South Korea's financial watchdog will revise its rules on local banks' overseas borrowing in a bid to improve their foreign currency liquidity conditions, the nation' s top financial regulator said Friday.
According to the Financial Services Commission (FSC), it plans to require local banks to increase the proportion of mid-and long-term borrowing to finance their loans with maturity of more than one year, from the current level of 80 percent to 110 percent this year and to 120 percent next year.
The envisioned revision comes amid the watchdog beefing up efforts to fight against foreign currency-related problems.
"There is the need to toughen supervisory tools as problems related to such liquidity could spark systemic risks," Chin Dong-soo, chairman of the FSC, told a press conference.
The FSC will also call upon local lenders to strengthen their risk management for foreign currency liquidity by placing limits on the ratio of foreign currency assets to their equity capital, the watchdog said.
The details of the plan will be finalized in October, ready for implementation next year, it added.
Amid a global financial turmoil, South Korean banks faced concerns that it may fall into a severe liquidity crunch, which may be deepened due to its high proportion of short-term borrowing.
As of the end of June, short-term foreign debt held by local banks stood at 106.2 billion US dollars, up 2.42 billion US dollars from a quarter earlier.
