Korean banks’ short-term foreign borrowing rose in June as lenders rushed to secure foreign currency funds amid worries the eurozone debt crisis may worsen, the financial watchdog said Thursday.
A total of 16 local banks refinanced 107.4 percent of their maturing short-term foreign debt through fresh borrowing in June, up from 94.9 percent in the previous month, according to the Financial Supervisory Service.
A bank’s short-term refinancing rate gauges the percentage of its new borrowing against foreign currency debts that mature in one year or less. In March, the refinancing rate shot up to 121.6 percent as local banks beefed up overseas debt on jitters over Japan’s earthquake.
The FSS noted the conditions for borrowing foreign debt turned stable following the approval of Greece’s austerity measures.
“Conditions slightly soured on concerns the rejection of Greece’s austerity measures may heighten southern Europe’s financial crisis, but they recovered after the measures were passed on June 29,” the FSS said in an emailed statement.
The spread on credit default swaps for Korea’s dollar-denominated currency stabilization bonds reached 101 basis points at the end of June, compared with 97 basis points in the previous month. A basis point is 0.01 percentage point.
The spread on CDSs reflects the cost of hedging credit risks on corporate or sovereign debt.
The FSS said it will closely monitor banks’ foreign exchange liquidity conditions to brace for a possible deterioration of the eurozone debt crisis.