South Korean banks' foreign borrowing reduced last month as local lenders paid back external debts with long-term funds borrowed in advance, the financial watchdog said Monday.
The rollover rate of long-term external debts with a maturity of one year or more at 12 domestic banks, excluding regional banks, reached 68.9 percent in April, according to the Financial Supervisory Service (FSS).
The rollover rate gauges the percentage of fresh borrowing from overseas against foreign debts that mature within the month. The rate below 100 percent means local lenders repaid their maturing debts rather than refinancing them.
The April figure was down from 113.4 percent tallied in the previous month and a monthly average of 177.1 percent during the January-April period. Domestic banks continued to reduce their foreign borrowing this year as they secured foreign liquidity earlier in preparation for the potential external uncertainties.
Meanwhile, the refinancing rate of short-term foreign debts that mature in one year or less at 16 local banks came in at 95.5 percent, slightly up from 94 percent a month earlier, according to the FSS.
The rollover rate of short-term debts was up last month, but local banks continued to pay back short-term debts with funds secured through long-term borrowing.
Market concerns over Europe's debt crisis resurfaced in April after the global credit rating agency Standard & Poor's downgraded the sovereign credit rating of Spain to BBB+ from A, but foreign currency funding conditions for local lenders showed stable picture.
The spread on credit default swap (CDS) for the South Korea's dollar-denominated sovereign debts that mature in five years came in at 121 basis points (bps) as of the end of April, down 2 bps from a month before.
Weighted average spread on local banks' foreign borrowing with a maturity of less than one year fell 6.4 bps on-month to 8.9 bps in April, with the spread on foreign debts that mature in one year dropping 26 bps to 111 bps. But the figure for five-year foreign debts jumped 26 bps to 216 bps as lenders with relatively low credit rushed to issue bonds, said the FSS.
Local banks' foreign currency soundness numbers exceeded their recommended levels. The 3-month foreign currency liquidity ratio, a barometer of banks' foreign liquidity health, stood at 107.6 percent as of end-April, breaching the recommended level of 85 percent.
The ratio is calculated by dividing liquid foreign assets that mature within three months by liquid foreign liabilities with a maturity of less than three months.
Both 7-day and 1-month mismatch ratios stayed above the recommended level of minus 3 percent and minus 10 percent in April. The ratios stood at 1.7 percent and 2.4 percent each last month.