FSS asks banks to stiffen foreign currency liquidity

South Korea's financial regulator said Monday it asked local bank executives to beef up management of foreign currency liquidity ahead of a potential eruption of global financial market instability due to Greek debt troubles. "We asked banks to stiffen foreign exchange liquidity risk management in order to prepare for the possibility that funding conditions in the global financial market get worse," the Financial Supervisory Service (FSS) said. In a meeting with local bank executives in charge of foreign currency dealings, the FSS also urged local banks to restrain the growth of unnecessary foreign currency-denominated assets and clear bad foreign assets in order to prevent potential degradation of asset quality, the regulator said in a report. Bank officials were also asked to diversify ways to raise foreign funds during a time of crisis, including securing credit lines or committed lines used to clinch emergency financing. The move by the FSS comes as the global market is bracing for an aid payment to debt-ridden Greece, which could push up volatilities in the global financial market.