The Bank of Korea to Include Special Bank Bonds MBS in Simple Trading Securities

September 9 FOMC, Expansion of Securities Eligible for Simple Open Market Operations
Including SME Financial Bonds, Export-Import Financial Bonds, Korea Housing Finance Corporation, MBS, and More

[Asia Economy Reporter Jang Sehee] The Bank of Korea announced on the 9th that it will include special bank bonds, etc., in the simple trading securities, which have been limited to government bonds and guaranteed bonds. This expansion of simple trading securities is the first since the global financial crisis in 2008.

On the same day, the Bank of Korea held a Monetary Policy Committee meeting and approved an amendment to the Open Market Operations Regulations to include ▲small and medium enterprise financial bonds ▲export-import financial bonds ▲Korea Housing Finance Corporation mortgage-backed securities (MBS) in the simple trading securities for open market operations.

The Bank of Korea stated, "This measure is expected to facilitate fund-raising for financial institutions and reduce funding costs."

When the Bank of Korea supplies funds to financial institutions by purchasing special bank bonds such as Korea Development Bank bonds, special banks can issue bonds at lower interest rates. If the raised funds are used to purchase corporate bonds, it also contributes to stabilizing the bond market.

This time, the Bank of Korea included not only special banks but also Korea Housing Finance Corporation mortgage-backed securities (MBS) as simple trading securities. The intention is to ease the burden on banks whose MBS holdings have significantly increased due to products like the Safe Conversion Loan.

Additionally, the Bank of Korea decided to include bonds issued by the Korea Deposit Insurance Corporation in the current repurchase agreement (RP) trading securities and eligible collateral securities for loans.

Meanwhile, this measure will take effect from the 14th and will be valid until March 31, 2021.

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