Hi Maurice, I am not sure I like this piece of news hunted up by Les over at CFZ:
Message 18163867
Makes me feel uncomfortable to be in a crowded trench:0/
english.chosun.com
Updated Oct.27,2002 19:36 KST
Loans in Yen Mushrooming
by Park Jung-hun (jh-park@chosun.com)
In a move away from the heated drive to raise home loans, banks are now pursuing sales of yen-denominated loans aiming at small and mid-sized firms and self-employed individuals. Industry sources said the banks' total outstanding loans in yen thus far this year have reached W4 trillion.
Yen loans, getting a loan in the Japanese currency and paying back in the same currency, have been offered at a far lower yearly interest rate of around 3 percent, as Korean banks' source of the loan funds are mostly from Japan.
Korean banks, however, have been criticized for snowballing the yen loan through reckless sales of the loan, without explaining in detail the risks involved in the foreign currency-denominated loan, such as the risk of conversion rates rising.
Korean banks' heavy borrowing of yen loan from Japan on an annual interest rate of 0.7 to 0.8 percent has resulted in a upsurge in the banks' risky short-term debt, and the Bank of Korea began monitoring the status of yen loans at each bank.
The central bank noted that the ratio of short-term debt to the nation's total foreign liabilities soared to 39.8 percent at the end of August from about 33 percent early this year.
Industrial Bank of Korea first introduced the yen loan product in the country. In the first eight months this year, the bank has attracted a total of W2.3 trillion in such loans from about 4,100 small firms, offering an annual interest rate of 2.6 to 3.5 percent.
Spurred by the success of the loans at Industrial Bank, Korea Exchange, Hana and KorAm banks jumped in the yen loan market in summer. In September, Kookmin and Woori started the same program. |
