S.Korea’s IBK, Japan’s Mizuho Bank agree on $218-million committed line

South Korea’s state-run Industrial Bank of Korea (IBK) has agreed on a 300 billion won ($218 million) committed credit line with Japanese leading lender Mizuho Bank, allowing the Korean policy bank to secure a stable level of foreign currencies worth about $700 million in total.

IBK and Mizuho on Monday signed a one-year bilateral committee credit facility agreement worth 300 billion won, or 30 billion yen, IBK announced on Tuesday. The term can be extended another year upon agreement.

Committed lines give the borrower the priority right to receive money within the agreed credit limit, and they are considered a safe means by which to borrow foreign currencies, an essential lifeline for financial institutions during financial crises or a liquidity crunch.

With the latest agreement, IBK has secured a total of about $700 million worth of committed credit facilities, of which some will be offered to Korean small and medium-sized enterprises for their import and export transactions, IBK said.

Amid growing geopolitical tensions in the Middle East, Korea’s local currency has significantly lost its value against the US dollar in recent days.

A week ago, the Korean won touched the 1,400 per dollar level, for the first time in 17 months amid deepening Middle East woes and dashed hopes for imminent rate cuts in the US, triggering a capital flight from the export-oriented economy, Asia’s fourth largest.

The Korean won has weakened past the 1,400 level only during the Asian financial crisis in 1997-98, the global financial meltdown in 2007-08 and the global rate hike campaign led by the US Federal Reserve in late 2022.

Korea and Japan in December last year also revived their bilateral currency swap line worth $10 billion to boost their dollar liquidity.

The swap program will allow Seoul and Tokyo to exchange their local currencies for US dollars over the next three years.

IBK was founded in 1961 as a state-owned policy bank to promote small and medium-sized businesses under Korea’s Industrial Bank of Korea Act.

Write to Bo-Hyung Kim at kph21c@hankyung.com

Sookyung Seo edited this article.