우리나라 은행의 외화자금 조달방식과 외화유동성 위험(Overseas financing and foreign liquidity risk in Korea; Does the choice of financing matter?)

This paper empirically investigates the relationship between the choice of overseas financing and its impact on foreign liquidity in the case of commercial banks in Korea. More specifically, we are interested in the impact of choosing overseas financing via deposit-taking, borrowing and bond issuance on foreign liquidity. We apply the indicator of net stable funding difference suggested by Angora and Roulet (2010) to the balance sheet denominated in foreign currency which provides a more accurate description of the foreign liquidity condition of banks. Panel regression analysis based on 8 major commercial banks in Korea from 2001 to 2009 shows that foreign liquidity deteriorates with higher levels of short term borrowing while the opposite is true with long term borrowing. This confirms the conventional view that short term borrowing is detrimental to foreign liquidity. In addition, we found that, among long term overseas financing, long term borrowing actually improves the foreign liquidity condition whereas long term bond issuance resulted in the opposite. This result can be interpreted as stressing the importance of relationship building with clients through direct borrowing which is difficult to develop when issuing bonds.