South Korean banks' mid- and long- term foreign borrowing continued its upward trend last month as local lenders rushed to secure foreign currency liquidity with longer maturity in a bid to brace for the potential external uncertainties, the financial watchdog said Monday.

The rollover rate of long-term external debts with a maturity of one year or more at 12 domestic banks, excluding regional banks, reached 267.6% in February, according to the Financial Supervisory Service (FSS).

The figure was lower than 382.2% tallied in January, but it stayed at a high level as the financial regulator encouraged banks to increase long-term funds rather than short-term financing in preparation for the possible aggravation in external conditions. The long-term refinancing rate averaged 150.8% in 2011.

The rollover rate gauges the percentage of fresh borrowing from overseas against foreign debts that mature in more than one year. The rate above 100% means domestic lenders refinanced their maturing foreign debts rather than repaying them.

Meanwhile, the refinancing rate of short-term foreign debts that mature in one year or less at 16 local banks, came in at 65.1% in February, down from 90.3% a month earlier, according to the FSS.

The fall was attributed to local lenders that repaid maturing short-term debts with funds secured through long-term borrowing, the FSS said.

Conditions for foreign borrowing were enhanced last month amid easing worries about the European sovereign debt crisis. Concerns over the crisis in Europe weakened after the European Central Bank (ECB) injected a massive amount of liquidity into the region's banking system.

The spread on credit default swaps (CDS) for the South Korea's dollar-denominated sovereign debts that mature in five years came in at 136 basis points (bps) as of the end of February, down 14 bps from the previous month.

Weighted average spread on local banks' foreign borrowing with a maturity of less than one year dropped 23.9 bps on-month to 8.8 bps in February, the lowest since the watchdog began compiling the data in 2009. The spread on foreign debts that mature in one-year fell 5 bps on-month to 125 bps last month, and the figure for five- year foreign debts sank 21 bps to 246 bps over the cited period.

Local banks' foreign currency soundness numbers exceeded their recommended levels. The 3-month foreign currency liquidity ratio, a barometer of banks' foreign liquidity health, stood at 107.9% as of end-February, breaching the recommended level of 85%.

The ratio is calculated by dividing liquid foreign assets that mature within three months by liquid foreign liabilities with a maturity of less than three months.

Both 7-day and 1-month mismatch ratios stayed above the recommended level of minus 3% and minus 10% in February. The ratios stood at 1.7% and 1.9% each last month.