S.Korea considering steps to boost bank liquidity

By Reuters Staff
November 11, 2009

SEOUL, Nov 11 (Reuters) – South Korea is looking at measures to enhance foreign currency liquidity at banks, a top regulator said on Wednesday, which reportedly may require them to hold U.S. Treasuries as a portion of their foreign assets.

Chin Dong-soo, chairman of the Financial Services Commission, told reporters that the authorities were in discussion over several measures on bank liquidity, without elaborating.

When asked, he did not deny the possibility of having banks hold a level of U.S. Treasuries in their foreign currency assets.

On Monday, Yonhap News Agency reported that financial authorities were considering a measure to force local banks to invest more than 2 percent of their total foreign assets in safer assets with credit ratings above A.

“We’re planning to require local banks to hold a certain amount of foreign assets with high credit ratings such as U.S. Treasuries,” an unnamed official at a financial watchdog was quoted as saying.

The move came after domestic banks suffered a severe foreign currency liquidity crunch late last year during the peak of the global financial crisis hit by the collapse of the sub-prime mortgage loans.

(Reporting by Lee Chang-ho, Kim Yeon-hee and Seo Eun-kyung; Editing by Ken Wills) ((yeonhee.kim@thomsonreuters.com; +82 2 3704 5646; Reuters Messaging: yeonhee.kim.reuters.com@reuters.net)) ((If you have a query or comment on this story, send an email to newsfeedback.asia@thomsonreuters.com))

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