South Korean banks’ short-term overseas borrowing declined in April as lenders secured enough funds in the past few months to make it possible to cut back on incurring fresh debt, the financial watchdog said Monday.

According to the Financial Supervisory Service, the spread on short-term foreign borrowing by local banks stood at 8.9 basis points, a drop from 15.3 basis points in March. A basis point is 0.01 percentage point.

“The move by local banks to secure sufficient funds from late 2011 onwards to insulate themselves from possible financial sector problems, and general abundance of liquidity in the global market helped to bring down the spread last month,” an FSS official said.

The spread on mid- and long-term foreign borrowing that matures in five years, however, rose to 216 basis points last month from 190 basis points, according to the FSS.

The FSS said local banks refinanced 95.5 percent of their maturing short-term foreign debts through fresh borrowing last month, compared with 94 percent in the previous month.

The rollover rate gauges the percentage of fresh overseas borrowing against foreign debts that mature in one year or less. A refinancing rate of more than 100 percent indicates local lenders have acquired more fresh foreign loans rather than refinancing their maturing foreign debts.

The refinancing rate of local lenders’ mid- and long-term foreign debts stood at 68.9 percent, ending 10 straight months of lenders acquiring fresh foreign debts, the FSS said.

The regulator said that overall, overseas borrowing has not been affected by persistent eurozone developments like the downgrading of Spain’s sovereign credit rating. It said South Korean banks, for the moment, should not have much difficulty acquiring foreign exchange liquidity.

The FSS, however, said there is a need to keep tabs on Europe’s fiscal troubles so foreign borrowing can be flexibly adjusted to reflect market developments. 

(Yonhap News)