The Bank of Korea to Auction $12 Billion in Korea-US Currency Swap Funds Today

[Image source=Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] Of the $60 billion in funds from the Korea-US currency swap, the first tranche of $12 billion will be supplied to the market on the 31st.

The Bank of Korea announced that it will conduct a foreign currency loan bidding through the Bank of Korea's financial network electronic bidding system from 10:00 to 10:30 a.m. on the day, targeting domestic commercial banks. The first tranche, which accounts for 20% of the total quota, will be released to the market, which is three times the amount supplied in the first tranche ($4 billion) during the 2008 global financial crisis.

The scheduled bidding amount is $2 billion for the 7-day term and $10 billion for the 84-day term, totaling $12 billion. The minimum bid interest rates are set at an annual rate of 0.322% for the 7-day term and 0.3210% for the 84-day term.

The bidding will proceed using a 'multiple price method,' where the interest rate proposed by the successful bidder is applied. All banks, including the Export-Import Bank of Korea, the Korea Development Bank, and the Industrial Bank of Korea, can participate in the bidding. The Bank of Korea will receive collateral amounting to 110% of the foreign currency loan. Priority will be given to government bonds, government-guaranteed bonds, and Monetary Stabilization Bonds, but if insufficient, bank bonds, mortgage-backed securities issued by the Korea Housing Finance Corporation, and Korean won cash will also be accepted as collateral.

The actual disbursement of funds to banks will occur on April 2.

Previously, the Bank of Korea signed a currency swap agreement worth $60 billion with the US Federal Reserve (Fed). A currency swap is an agreement that allows a country to deposit its own currency with the counterpart country and receive the counterpart country's currency or dollars in times of emergency such as a foreign exchange crisis.

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