By Yoon Ja-young
Staff Reporter
Seoul regulators have urged banks to refrain from bringing in short-term foreign funds, which has led to the appreciation of the local currency against dollar and a possible decrease in exports.
The warning came days after the central bank warned banks and exporters against engaging in speculative currency trading, namely selling dollars out of expectation that the local currency will strengthen.
Policymakers will hold a meeting today to review the severity of growing short-term borrowing of foreign currencies and come forward with countermeasures. They will also take a close look into record household debt and other pending issues on the financial market.
The Ministry of Finance and Economy (MOFE) will preside over the meeting with the Financial Supervisory Commission and the Bank of Korea at Chong Wa Dae, the ministry said.
The government is most concerned over the sharp rise in short-term borrowing of foreign currencies. Short-term foreign currency borrowing, repayable in less than a year, grew by $48 billion last year. Foreign banks brought in $17 billion, accounting for 36 percent of the growth last year.
It has increased by $12.7 billion so far this year, with $6 billion brought in last month. Foreign banks operating in Korea have been the biggest contributor to the surging short-term foreign debt.
Deputy Finance and Economy Minister Cho Won-dong said, ``We're closely monitoring short-term foreign currency borrowing as it poses a problem for the economy.'' .
The government said there is not much of a problem with the country's fundamentals but the increasing short-term borrowing by foreign banks may conflict with the government's foreign debt management policies. Hence, the financial regulatory body recently requested foreign banks to cut down on such borrowing.
Other risk factors include household debt and mortgages.
Samsung Economic Research Institute warned last week that household debt had reached an alarming level, and compared it with the credit card crisis in 2002.
The officials will also discuss whether to loosen restriction on mortgages. The government strengthened regulations on housing loans to suppress soaring real estate prices, but there are increasing signs that the real estate market is stabilizing.
As housing prices recorded a downward move in some places, concerns are rising over the financial health of those with mortgages.