S.Korea agrees to guarantee banks' foreign loans

SEOUL, Nov 15 (Reuters) - South Korea's financial watchdog said on Saturday it has signed an agreement with local banks that guarantee their foreign debt.

The moves comes amid mounting worries that banks in the country are facing difficulties raising funds and rising bad debt as Asia's fourth-largest economy is hit by a global recession.

Under the memorandum of understanding, the banks will seek to raise their capital ratios to 11-12 percent, the Financial Supervisory Service (FSS) said in a statement.

Local banks' capital ratios, guided by the Bank of International Settlements, slid to an average of 10.79 percent at the end of September, the lowest in 7-½ years, due to investment losses and and an increase in risky assets.

The banks will also seek to expand credit lines, diversify methods of securing foreign currency, and sell minor foreign assets. The agreement also includes a 10-30 percent cut in salary and stock options for senior employees, the watchdog said. (Reporting by Angela Moon; Editing by Jan Dahinten)