South Korea's central bank said on Tuesday that it has decided to provide US$4 billion received from US Federal reserve to local banks to ease their credit crunch.

The money to be provided through a competitive auction was part of a currency swap deal forged between South Korea and the United States last month, in which the US counterpart agreed to offer maximum US$30 billion to the Bank of Korea (BOK).

According to the BOK, 15 banks participated in the auctions to extend their loans at an average annual interest rate of 6.839 percent with maturity of 84 days.

The step was made amid growing concerns of fast drain in the country's foreign reserves as currency authorities spent part of the reserves to buttress up the falling won and extended dollar liquidity to the financial system.

At the end of October, South Korea's total foreign reserves amounted to US$212.25 billion, down from US$27.4 billion in the previous month, marking the largest monthly drop in history, the BOK said.

The South Korean won lost almost 37 percent against the US dollar so far this year as foreign investors continued to sell local stocks amid ongoing global financial turmoil.

(Xinhua News Agency December 2, 2008)