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Commercial banks deposited more than W14 trillion (US$1=W1,444) in the Bank of Korea but refuse to lend to cash-strapped businesses.
They have apparently deposited the money the central bank gave them to boost liquidity back in the BOK because using the money to extend loans would lower their Bank for International Settlements capital adequacy ratios, the measure of their financial health. Now the BOK is under pressure to pour more cash into the market, keeping in mind tight standards set by credit ratings agencies for the BIS ratio in order to maintain investor confidence.
The BOK on Monday said the short-term deposits by commercial banks in the central bank had reached W14.8 trillion by last Friday. Banks are obliged to deposit in the central bank money that will be used to cover future payment obligations, and for this purpose they have deposited W25 trillion in the BOK. That means they have additional funds of more than 50 percent of the required deposits in the BOK.
A BOK official said the reason is that banks got liquidity assistance from the central bank and then deposited that money straight back in the BOK, reluctant to use it to lend to businesses that find themselves short for fear that their BIS capital adequacy ratios could be damaged.
The BOK, meanwhile, announced on Monday it is easing regulations on collateralized loans to small- and mid-sized exporters as part of the government¡¯s efforts to help them out. In the past, the BOK would extend collateralized loans to banks equivalent to the amount of credit they extended to exporters, but from now on it will offer collateralized loans covering all export credit since Nov. 17.
Since the weak won sent the payment burden on foreign-currency debt skyrocketing, the BOK decided to scrap repayment deadlines on foreign-currency loans taken out for use as operating funds.
(englishnews@chosun.com )
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