Concerns Over Credit Crunch Spread... Bank of Korea Expands Eligible Collateral Securities (Update)
Addition of Eligible Collateral Securities Recognition for Industrial Financial Bonds, Small and Medium Enterprise Financial Bonds, and Export-Import Financial Bonds
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[Asia Economy Reporter Jang Sehee] The Bank of Korea held a Monetary Policy Committee meeting and decided to expand the eligible collateral securities that banks must provide when borrowing from the Bank of Korea starting next month on the 1st. This is interpreted as an intention to prevent the spread of credit crunch concerns due to recent domestic and international financial market instability. No agenda related to monetary policy was presented at the Monetary Policy Committee meeting on this day.
On the 12th, the Bank of Korea newly added industrial finance bonds, small and medium enterprise finance bonds, export-import finance bonds, and MBS issued by the Korea Housing Finance Corporation to the list of eligible collateral securities for loans.
The expansion of eligible collateral securities for loans effectively strengthens the foundation for the Bank of Korea to smoothly supply liquidity to banks through loans when necessary. The Bank of Korea expects this measure to alleviate the burden on banks in providing collateral for loans from the Bank of Korea and to help improve banks' profitability. Additionally, it is expected to contribute to improving the bond issuance conditions of the Korea Development Bank, Industrial Bank of Korea, Export-Import Bank of Korea, and the Korea Housing Finance Corporation.
The scale of eligible collateral securities newly recognized and held by banks is estimated to be about KRW 100 trillion as of the end of last month.
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Before the start of the Monetary Policy Committee meeting, the Bank of Korea announced in advance that this meeting was not for deciding interest rates. The Bank of Korea stated, "No agenda related to monetary policy direction is scheduled for today's Monetary Policy Committee." This appears to be aimed at blocking market expectations for a base rate cut through an emergency Monetary Policy Committee meeting.
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