South Korea's Shinhan Bank has responded to the weakening of the won and volatile economic conditions by extending the maturity of letters of credit (L/Cs) and providing additional funding for businesses paying for L/Cs.

The South Korean currency is under pressure on several fronts, including the global strengthening of the US dollar, political uncertainty in the wake of the shock decision of President Yoon Suk Yeol to impose martial law, tensions in the region, particularly related to North Korea, a slowdown in global growth, and rising oil prices.

L/C obligations

Exchange rate volatility is posing significant challenges for South Korean businesses engaged in international trade, particularly when their obligations are tied to L/Cs.

Shinhan Bank has therefore decided to extend the maturity and provide payment funds for L/Cs, which are widely used in international trade by South Korea's small- and medium-sized enterprises (SMEs).

Bank statement

"We have decided to provide financial support quickly for SMEs suffering from the rising exchange rate," according to a statement issued by Shinhan Bank.

"We will continue to provide practical win-win finance to help struggling SMEs through various methods in the future," it added.

Additional support

As well as extending L/C maturities, the bank is providing credit support to SMEs struggling with temporary shortages of payment funds due to the volatile exchange rate.

In addition, the bank is providing a range of financial and non-financial solutions, including tax, accounting, foreign exchange, legal, and marketing advice for SMEs.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.