As uncertainty in the domestic economy expands, banks are moving to raise funds in the overseas bond market. Despite unfavorable economic conditions such as domestic political instability and high exchange rates, the banking sector is expected to maintain a high level of external credibility, allowing for smooth funding.
According to the financial sector on the 13th, Hana Bank recently succeeded in issuing a 180 billion won won-denominated covered bond (double recourse bond), and is planning to issue a 500 million euro covered bond in mid-month.
Covered bonds are securities issued with high-quality assets held by financial institutions serving as collateral. They are used as a means of funding long-term fixed-rate loans. The covered bonds issued by Hana Bank are ESG (Environmental, Social, and Governance) bonds. ESG bonds are issued for projects that have a positive impact on the environment or society.
Investment bank (IB) industry experts expect that Hana Bank will receive orders for increased issuance as it fills its issuance volume adequately.
The Export-Import Bank also successfully issued a $3 billion global bond on the 8th. Initially aiming for a $2 billion issuance, the bank moved to predict demand but increased the issuance amount to $3 billion as orders reached up to $10 billion. This global bond issuance drew attention as it was the first public foreign currency bond after the emergency martial law situation.
Kookmin, Shinhan, and the Industrial Bank of Korea also raised funds through foreign currency bond issuance after the December 3 martial law situation last year. Kookmin Bank and Shinhan Bank successfully issued dollar bonds of $50 million and $45 million, respectively, on the 17th of last month. On the 18th of the same month, the Industrial Bank of Korea issued $50 million in dollar bonds.
There were also forecasts in the financial sector that domestic financial firms would face difficulties in raising funds in overseas markets due to political turmoil such as the impeachment crisis. In fact, it has been reported that there are considerable concerns among overseas investors regarding the political situation in Korea.
However, there are analyses in the financial sector suggesting that the impact of domestic political instability on the banking sector's external credibility is limited. In particular, the successful issuance of foreign currency bonds by the bank early this year further alleviated the burden on latecomers.
A market bank official noted, "When meeting with overseas investors, there are expressions of concern regarding the domestic political situation, but it does not affect the credibility of the banks," and added, "Funding in overseas markets will proceed without issues."