The Bank of Korea said Sunday that it has allowed 12 local commercial banks, beginning with Korea Exchange Bank, to extend renminbi-denominated loans to Korean traders for the first time.

This comes as Korea’s central bank and the People’s Bank of China agreed to let their companies settle trade bills with their respective currencies using part of the two sides’ currency swap deal worth 64 trillion won or 360 billion yuan.

Korean importers would be able to borrow from their local lenders that will have access to some 6.2 million yuan in the central bank’s yuan account, and vice versa.

Yuan-denominated loans will be extended based on China’s interbank lending rate of Shibor, central bank officials said.

China has been expanding its currency swaps since 2008 at the height of the global financial crisis with its trading partners as part of efforts to lessen its dependence on the U.S. dollar and internationalize the yuan.

China has swapped its currency worth 1.7 billion yuan with 18 countries in Asia as of the end of December 2012.

(hkp@heraldcorp.com)