DESPITE difficult market conditions, Korea-based Hana Bank completed an issue of US$50 million floating-rate notes (FRNs) yesterday, the bank's subsidiary in Hong Kong says. Kim Ju-kyung, the managing director of subsidiary Hana Finance Asia, said that the interest margin of Hana Bank's borrowing dropped from last year's 46 basis points to this year's 42 basis points over the six-month London interbank offered rate (Libor). The cost of funding for some Korean banks soared from 39 to 45 basis points, resulting in some banks scrapping their fund-raising plans. Mr Kim disagreed that the Asian debt market was crowded with Korean banks seeking cash as he knew four to five Korean banks had abandoned plan to raise US dollars owing to the unfavourable interest rates. The rise of the loan rates was due to the 'Japanese premium'. Japanese banks were paying more for their own funds and were passing the higher costs on to South Korean borrowers after the scandal in Daiwa Bank's US operations. 'The [loan] market condition has deteriorated owing to Daiwa Bank incident and Japanese lenders are asking for higher interest rates,' he said. He said Japanese banks were still the major suppliers of funds and Hana Bank had secured better interest rates than last year. The bank borrowed $75 million at 46 basis points plus Libor last year but this year the basis points were lowered to 42. He said the lowering of the basis points showed the lenders were confident of the bank's performance. Hana Bank would use $30 million for domestic lending and the rest for off-shore offices in countries in Southeast Asia, including Thailand, he said. The issue's arrangers were Fuji International Finance, Merrill Lynch Hong Kong Securities, Sakura Finance Asia, Standard Chartered Capital Markets and WestLB Asia Pacific. The notes carried a coupon of 37.5 basis points over the six-month Libor and would be listed on Luxembourg Stock Exchange.