Greece owes Korea $500 mil.

By Kim Jae-won

Korea is estimated to have outstanding loans to the tune of $500 million to troubled Greece, the Financial Supervisory Service (FSS) said Sunday.

However, this limited exposure should not be taken as any consolation, experts say, considering that the Greek crisis is set to spread, causing European lenders to pull out their overseas funds.

Korea is home to a significant amount of European investment, both direct and in equity.

If Greece falls, it could trigger a domino effect among the weaker eurozone economies as well as impact pillar economies such as France and Germany.

The financial regulator said that credit lines from Korean banks to Greek companies were estimated at $500 million in March.

There has been almost no change in the banks' exposure since then, the FSS said, without disclosing a bank-by-bank breakdown.

The FSS said even if Greece declares a national moratorium on the servicing of its debts, the damage will be limited because most of the debtors are shipping companies, which have provided their vessels as collateral.

"Even if Greek shipping companies fail to service their debts, Korean banks will be able to recover much of their loans," said a researcher at Daishin Securities.

The financial watchdog also said that the figure is considerably low, compared to other advanced nations. According to the Korea Center for International Finance (KCIF), European nations are the biggest creditors of Greece.

France held 40.9 billion euros ($57.9 billion) of Greek bonds in September, while Germany had 24.6 billion euros ($34.8 billion) of bonds issued by Greece.

Greece has also borrowed 10 billion euros ($14.2 billion) from Belgium and 9.6 billion euros ($13.6 billion) from Italy.

Non-European advanced nations are also significantly exposed to soured Greek debts. The U.S. had 2.1 billion euros ($3 billion) and Japan 3.7 billion euros ($5.2 billion) in Greek bonds, lending six to 10 times more than Korea did.

But, some financial experts say that Korea could suffer side effects from the Greek debt crisis, if troubled European lenders and investors pull their funds out of Korea.

"If European banks cut back on their lending to emerging markets due to the Greek crisis, Korean lenders could suffer a credit crunch," said a researcher at KCIF.

The amount of foreign exchange from European banks accounts for almost half of Korea’s foreign currency market, and investments from Europe occupy one third of foreign investments in Korean stock markets.

BNP Paribas have 5 billion euros ($7.1 billion) of Greek bonds, while Dexia and Societe Generale hold 3.5 billion ($5 billion) and 2 billion euros ($2.8 billion), respectively, according to KCIF.