South Korea's financial watchdog denied the possibility that Japanese financial firms' withdrawal from local market in March may lead to a financial crisis, South Korea's Yonhap News Agency reported on Monday.

As rumors are rampant that there may be a massive capital exodus from the Seoul market by Japanese capital firms, market fears over the possibility of financial crisis in March grow stronger, Yonhap said.

"Under the current situation, it is highly unlikely that the so-called March crisis will materialize," the Financial Services Commission (FSC) said in a report to the National Assembly.

According to the FSC, debt from Japanese financial firms schedule to mature in the first quarter would reach US$1.98 billion, which stands at a manageable level.

The watchdog said local bonds owned by Japanese investors take up a mere 0.6 percent of total foreign debt as of February 16.

Foreign investor-owned local bonds, which become due in March, mark 3.5 trillion won (US$2.36 billion), a manageable amount according to the watchdog.

The Bank of Korea said last week that local banks hold foreign debts worth US$10.4 billion maturing in February and March, which it said the country could manage with its US$201.74 billion foreign reserves.

"Until the current turmoil in global financial markets completely settles down, the watchdog plans to closely monitor dollar liquidity conditions in the local market," the FSC added.

(Xinhua News Agency February 23, 2009)