Chaean Fund Purchases A+ Rated Asset-Backed Securities and Corporate Bonds

Son Byung-du, Vice Chairman of the Financial Services Commission (Photo by Yonhap News)

[Asia Economy Reporter Kim Hyo-jin] Financial authorities have allowed the bond market stabilization fund (Bond Stabilization Fund) to purchase A+ rated specialized credit finance company bonds (specialized finance bonds) starting from the 1st of next month.

On the morning of the 19th, Sohn Byung-doo, Vice Chairman of the Financial Services Commission, held a 'Financial Risk Response Team' meeting related to the novel coronavirus infection (COVID-19) at the Korea Federation of Banks in Jung-gu, Seoul, attended by related agencies such as the Ministry of Economy and Finance, the Financial Supervisory Service, and key financial company officials, where he announced this policy.

Additionally, from the end of next month, the authorities decided to include specialized finance bonds rated A- or higher in support when issuing COVID-19 related Primary Collateralized Bond Obligations (P-CBOs).

The Bond Stabilization Fund has been purchasing specialized finance bonds rated AA- or higher since the 9th of last month, considering the repayment deferral support performance for small and medium enterprises and small business owners of specialized finance companies, but had not included specialized finance bonds in the purchase targets for COVID-19 related P-CBOs.

The financial authorities also included companies that were rated AA- or higher as of the 1st of last month but were subsequently downgraded to A+ (Fallen Angels) in the Bond Stabilization Fund's purchase targets.

On the 29th, plans are in place to issue COVID-19 related P-CBOs worth a total of 509 billion KRW from 23 companies and main industry P-CBOs worth 427.7 billion KRW from 174 companies.

Meanwhile, to ensure the prompt funding support of the 40 trillion KRW scale Industrial Stabilization Fund (Industrial Fund), the financial authorities decided to establish the Industrial Fund Secretariat at the Korea Development Bank within this week.

Based on this, they plan to complete the composition of the Fund Operation Deliberation Committee next week to launch the Industrial Fund as quickly as possible and enable loans to companies by next month.

Vice Chairman Sohn Byung-doo stated, "We will continuously monitor to prevent the market from overreacting or becoming paralyzed by fear beyond the actual impact of COVID-19 and will respond immediately if necessary."

Meanwhile, since the first announcement of COVID-19 related financial support measures on February 7th, the financial authorities have identified that a total of 1,185,000 cases amounting to 97.8 trillion KRW have been supported for small and medium enterprises and small business owners as of the 15th of this month.

New loans and guarantee support accounted for 49.5 trillion KRW, maturity extensions and repayment deferrals of existing funds were 45.4 trillion KRW. Interest payment deferrals amounted to 900 billion KRW, and 2.1 trillion KRW was supported through other export-import financing (letters of credit) and interest discounts.

Among the total support, policy financial institutions handled 53.8 trillion KRW, commercial banks 43.3 trillion KRW, and the secondary financial sector 800 billion KRW.

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