Foreign Banks to Withdraw W2.5 Tril. in Exposures

Article excerpt

The new regulation on banks' lending limit effective this year will require foreign banks to withdraw over 2.5 trillion won ($2.2 billion) worth of exposure in Korea.

A foreign banker said that the reduced credit limit the Korean government imposed on 50 foreign bank operations in Seoul will mean that they will have to retrieve part of their loans worth 2.5 trillion won.

``We will have to withdraw a large portion of our credits in local conglomerates following the new regulation which will seriously discourage business with local clients,'' he said during a phone interview with The Korea Times.

``Some large foreign banks with enough capital may not be affected much. But particularly for small and medium sized foreign banks, this will be a discouraging factor,'' he said.

The new credit ceiling imposed on the international banking community in Seoul has been in serious dispute as each foreign bank finds the regulation unsatisfactory.

``The new credit limit effective this year, imposed by Korea's financial authority, will significantly reduce foreign bank borrowings for each local company. The concept is good,'' the foreign banker said.``Nevertheless, most new regulations issued by the Korean government just do not give enough time to the other side to be prepared in advance. The new rules always come in without much discussion on its long-term impact,'' he argued.

The new limit imposed on the banking sector requires foreign banks to keep their single lending limit below 20 percent and group lending to 25 percent of branch capital. …