In an October 8th article entitled “Korean banks forget mistakes” by Martin Hutchinson, the International Herald Tribune makes the following assertions:

• As in 1997, the banks borrowed dollars to lend won. Now the won’s drop has brought a crisis.
• Heavy domestic small business and credit card loan demand led Korean banks to incur short-term foreign currency liabilities of $45 billion at December 2007.

Response to the assertion of Korean banks borrowing in dollars and lending in won

As of end-June, 2008, Korean banks are mostly financing won-denominated loans (KRW873 trillion) with won-denominated deposits (KRW614 trillion), CDs (KRW129 trillion), and bond issues (KRW230 trillion). Foreign currency assets came to US$227.7 billion, which closely matched foreign currency liabilities of US$236.2 billion.

* Please refer to the attached PDF below.