June 20, 2011 / 6:58 AM / 8 years ago

S.Korea warns banks of possible FX liquidity crunch

SEOUL, June 20 (Reuters) - A top South Korean financial regulatory agency on Monday told major domestic banks to boost vigilance on foreign exchange liquidity positions, warning of a possible tightening in international credit markets.

The Financial Supervisory Service (FSS) convened a meeting of senior executives in charge of foreign exchange affairs at domestic banks and told them to enhance risk management on their foreign exchange liquidity, it said in a statement.

In addition to growing concern about the fiscal crisis in some south European economies, weak economic indicators such as the poor employment data in the United States were also causing market instability, it said.

The agency said it had asked banks to refrain from extending foreign exchange loans while aggressively disposing of bad foreign-exchange assets in preparation for a possible credit crunch in the global market.

An official at the agency said all 12 domestic banks with nationwide operations attended the meeting, which marked the second such gathering this year following one in February. (Reporting by Yoo Choonsik; Editing by Chris Lewis)

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