The Role of Financial Safety Pin

Korea Exim Bank monitors int'l financial markets and explores non U.S. dollar markets to diversify FX fund supply

Korea Export and Import Bank (Exim) has the experience and knowhow to cope with financial crises by successfully playing its role as a safety pin every time a global financial crisis develops at home and abroad.
Amid the global financial turbulence following the Lehman financial rupture, the bank issued $2 billion worth of global bonds in January 2009, which led other Korean banks to follow its example.
On behalf of the government, Exim provided foreign exchange to Korean financial institutions to speed up the economic recovery in Korea. Exim also monitored the changes in the international financial market, which became uncertain due to fears over the global economic recession and the European financial crisis from the beginning and prepared to cope with changes in the debt borrowing market from early this year by diversifying loan sources in order to be well prepared for the rising diversification of the international financial market.
Thus far this year, the bank borrowed $6 billion from overseas including $4.2 billion, or 70 percent, of the borrowed funds in diverse currencies other than the U.S. dollar. In January, the bank issued 40 billion yen in Uridashi bonds in Japan, followed by 80 billion yen worth of Samurai bonds in Japan in June. It also issued 392 million Chinese yuan ($62 million) in Dimsum bonds in August.
The surprising fact in Exim's overseas fund raising is that it included the successful issuance of $2 billion of U.S. bonds following the downgrade of the United States' credit rating, in addition to $6.2 billion in bank loans, the issuance of commercial papers and the issuance corporate bonds.
The bank has been trying to crack the niche markets and has led the efforts to provide liquidity whenever a foreign exchange crisis occurs, owing to various factors including holding investment relations at the centers of the financial businesses, the rapid decision-making system and the continuous monitoring of financial markets.
Last year, the bank secured $3.6 billion in various currencies from 13 countries and in the first half of this year alone, the bank secured $3.5 billion won in the currencies of 12 foreign countries.
Owing to the tendency to hold assets in various stable currencies, investments from such countries as Switzerland would flow into Korea and Exim will continue to exert its efforts as a leader in overcoming financial crises and as a scout for foreign exchange for Korea on a continuous basis.

The record for securing non-U.S. dollar funds in 2011(A):
In February, for the first time for a Korean financial firm, Exim issued Uridashi bonds that are sold to individual investors in Japan in the amount of 400 million yen at lower rates than those usually charged to Korean financial institutions. The bond has a four-year maturity and an interest rate of 1.05 percent, lower by 40 basis points (bp) than Samurai bonds issued to institutional investors.

The record for securing non-U.S. dollar funds in 2011(B):
In June, after a big earthquake and tsunami rocked Japan, Exim issued 800 million yen (about $1 billion) in Samurai bonds, the first time for an Asian financial institution.
Large foreign financial institutions issue the Samurai bond denominated in yen in Japan. The interest rate was Yen Libor+54 bp, the lowest charged for Korean issuers, a 50-bp lower level.

The record for securing non-U.S. dollar funds in 2011(C):
In August, Exim issued 392 million Chinese yuan in Dimsum bonds ($62 million) in Hong Kong for the first time for a Korean financial institution. The interest rates charged for Dimsum bonds in Hong Kong are lower than those charged in China. The interest rates were more favorable than those charged on U.S. bonds. The bonds with a one-year maturity (264 million yuan) bear an interest rate of Libor+0.75 percent, while those with a three-year maturity (128 million yuan) bear an interest rate of Libor+1.1 percent. nw

Chairman and President Kim Yong-hwan of Korea Export and Import Bank.

Photo on Courtesy of Korea Exim Bank