Government: Domestic Banks' Foreign Currency LCR Regulation to Apply 80→70% Until May (Update)

Government: "Financial companies exempt from foreign exchange soundness charge for 3 months"

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The government will temporarily ease the foreign currency Liquidity Coverage Ratio (LCR) regulation for domestic banks to 70% for three months until the end of May. This measure aims to expand the capacity of financial companies to supply foreign currency funds in response to the increased volatility in the global financial market caused by the COVID-19 pandemic.

On the 26th, Kim Yong-beom, the 1st Vice Minister of Strategy and Finance, announced this at a macroeconomic and financial meeting held at the Seoul Banking Hall. Lowering the foreign currency LCR regulation ratio will enable banks to supply foreign currency funds more smoothly to the market and companies. The LCR regulation was implemented in 2017. Since then, the ratio has been increased by 10% annually for general banks: ▲60% in 2017 ▲70% in 2018 ▲80% in 2019.

Vice Minister Kim said, "We will continuously supply foreign currency liquidity to alleviate the supply-demand imbalance in the foreign currency fund market," adding, "We will also promptly and sufficiently implement measures to directly supply liquidity to companies and financial institutions using the Korea-US currency swap funds and foreign exchange reserves."

The government also decided to exclude financial companies from the foreign exchange soundness charge for the next three months. For the charges confirmed last year and scheduled for collection this year, payment will be deferred through expanded installment payments. The temporary exemption of the foreign currency soundness charge reduces the cost for financial institutions such as banks, securities firms, insurance companies, and card companies to borrow foreign currency.

Vice Minister Kim emphasized, "Although foreign exchange reserves may temporarily decrease due to efforts to stabilize the foreign exchange and foreign currency fund markets and supply foreign currency liquidity, we have accumulated sufficient foreign exchange reserves, and with the strengthening of the external safety net through the Korea-US currency swap agreement, our external soundness will remain solid without change."

This content was produced with the assistance of AI translation services.