South Korea to guarantee banks’ foreign currency debts

October 19, 2008 by · Leave a Comment
Filed under: Global News 

More evidence of this global problem.  I am surprised to see this article, I thought the Fed offered unlimited currency swaps for countries needing dollars.  With S. Korea having the 6th largest foreign currency reserves, it looks like they are working on getting through this crisis under there own power.  If so, that would be the prudent approach to keep its credit rating in tact.

Release:

 

South Korea announced measures Sunday to shore up its banks by guaranteeing their external debt and pumping more money into the financial system amid the global credit crisis.

The government said it will provide up to $100 billion to secure banks’ maturing foreign currency debt for three years on loans taken out from Oct. 20 this year until June 30, 2009.

The announcement came as analysts have questioned South Korean banks’ ability to acquire dollars to pay off maturing foreign loans amid the global credit crunch.

Standard & Poor’s Ratings Services said last week that it may downgrade its credit ratings for some of South Korea’s biggest banks, citing concerns over their foreign currency funding.

“The government and the Bank of Korea together will further provide enough additional dollar liquidity to the bank sector,” Minister of Strategy and Finance Kang Man-soo told reporters.

Kang, Financial Services Commission Chairman Jun Kwang-woo and Bank of Korea Gov. Lee Seong-tae made the announcement at a joint news conference.

The government and Bank of Korea will also provide additional liquidity equivalent to $30 billion to the banking sector by utilizing foreign exchange reserves, the three officials said in a statement.

The measures require approval by the National Assembly. Until that can be secured, either the Korea Development Bank or Korea Eximbank will provide the guarantees beginning Monday, they said.

South Korean banks’ foreign debt reaching maturity by the end of June 2009 is estimated at about $80 billion, the statement said. It did not say when that debt was taken out.

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