South Korean banks have troubles in securing enough foreign-currency liquidity, and the government will use the official foreign reserves in helping banks secure liquidity, the country's finance minister said on Monday. Minister Kang Man-soo also said in a prepared speech for a meeting with heads of local commercial banks that it would take a long time until a US financial bailout plan starts to help ease the credit squeeze in emerging markets.
"Recently our financial institutions began experiencing troubles in securing foreign-exchange liquidity," Kang said. "The government judges that we need to deal with the situation pre-emptively while assuming the worst-case scenario." South Korea's current account turned into a deficit of $12.6 billion for the first eight months of this year from a surplus of $498 million for the same 2007 period and the country's external debt has risen fast, Kang noted.
"Our foreign exchange reserves amounting to $239.7 billion rank the world's sixth-largest and are almost 100 percent usable immediately," he said, repeating the government's earlier pledge to use the reserves in helping local banks secure liquidity.
Meanwhile, the head of the country's top financial regulator also said in his prepared speech for the same meeting that state-run banks such as Korea Development Bank would try to expand borrowing abroad. Jun Kwang-woo, chairman of the Financial Services Commission, also said the local financial authorities would also push ahead with earlier plans to sell stakes in state-run banks to secure foreign capital.