S.Korea wants fin crisis talks with China, Japan

By Jonathan Thatcher

SEOUL (Reuters) - South Korean President Lee Myung-bak wants to hold talks on the global financial crisis with leaders of China and Japan most probably later this month, a presidential Blue House official said on Monday.

The proposal came as the damage ripping through global markets took a heavy toll on South Korea, pulling its currency down to the lowest levels since 2002 and prompting the government to promise to dip into its currency reserves to help local banks manage a tightening liquidity squeeze.

"President Lee will propose a tripartite summit with Japan and China," she said.

The talks would most probably be in Beijing where all three will be for an annual meeting of Asian and European leaders set for October 24-25.

Lee late last week proposed that finance ministers from the three East Asian economic giants meet and look at ways to speed up the proposed creation of a pool of $80 billion in currency swaps to help cushion the impact of the financial turmoil that is now buffeting Asia after sweeping through the United States and Europe.

China and Japan together hold nearly $3 trillion in foreign exchange reserves.

South Korea's foreign exchange reserves at nearly $240 billion are slightly more than the country's external debt falling due within a year.

But a bleak current account outlook and continued capital flight have made a number of analysts question whether the amount would be enough if the global crisis were to trigger a massive and disorderly demand for dollar repayments by South Korean financial institutions.

Earlier, the finance ministry told banks that in the current environment, they should sell foreign assets to raise dollars and that it would use its currency reserves to help protect them.

(Editing by Nick Macfie)