Non-Makers to Get Foreign Currency Loans
By Na Jeong-ju
Staff Reporter
The central bank on Monday scrapped regulations barring banks from providing foreign currency-denominated loans to non-manufacturing firms in a bid to spur their investment in facilities.
Beginning this week, non-manufacturers will be able to borrow loans denominated in yen and dollars on condition that the money is spent on facilities investment.
In August last year, the Bank of Korea (BOK) strengthened lending rules on foreign currency loans as part of efforts to ease the won's strength against major currencies and made it impossible for non-manufacturing firms to get such loans.
Banks had provided foreign currency loans to manufacturing firms only.
``We decided to revise the rules on foreign currency loans as non-manufacturers have complained that they are having difficulty in raising funds for facilities investment,'' a BOK official said. ``Banks will be able to extend such loans to both manufacturing and non-manufacturing firms as long as the firms promise to spend the money on enhancing their facilities.''
The action reflects concern about the rising interest burden on companies that have borrowed won-denominated loans. Borrowing rates have surged here in line with rises in money market rates.
The BOK said the revision of foreign currency rules can raise companies' exposure to risks of currency fluctuations, but at the same time will make it possible for them to manage their loans more flexibly.
``If the won's value falls, they can increase the portion of won-denominated loans to save interest costs,'' the official said. ``However, it is impossible to predict how currency rates will change, so they need to be more cautious in making decisions on borrowing.''
Last year, the government took a set of measures to help boost the outflow of dollars to fight a strengthening won that is weakening the price competitiveness of Korean goods on overseas markets.