Bank of Korea and Ministry of Economy and Finance Prepare Additional Foreign Currency Liquidity Supply Measures (Update)

[Asia Economy Reporter Eunbyeol Kim] The Bank of Korea and the Ministry of Economy and Finance have prepared an additional new measure to supply foreign currency liquidity to the financial sector.

On the 30th, the Bank of Korea and the Ministry of Economy and Finance announced, "We are promoting the introduction of a foreign currency liquidity supply system through competitive bidding repurchase agreements for foreign currency bonds," adding, "The Bank of Korea will utilize its foreign exchange reserves to purchase foreign currency bonds held by domestic financial companies such as banks, insurance companies, and securities firms under repurchase agreements and supply US dollar funds."

The advantage is that since foreign currency funds are supplied while the Bank of Korea purchases foreign currency bonds from financial institutions, there is no change in the scale of foreign exchange reserves, and the purchased bonds can be disposed of at any time, so the availability of foreign exchange reserves is not restricted.

A Bank of Korea official stated, "With the introduction of this system, it is expected to stabilize the swap market by partially absorbing the structural foreign currency fund demand of non-bank financial companies such as insurance companies and securities firms."

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