Bank of Korea and Ministry of Economy and Finance Establish Foreign Currency RP Trading System..."Operation Considering Market Conditions"

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[Asia Economy Reporter Jang Sehee] The Bank of Korea and the Ministry of Economy and Finance have completed the establishment of a system that can supply foreign currency liquidity through a competitive bidding repurchase agreement (foreign currency RP) for foreign currency bonds.

On the 28th, the Bank of Korea and the Ministry of Economy and Finance announced that they have completed the necessary preparations, including revisions to related regulations and procedures and system development, to implement the "foreign currency liquidity supply system through competitive bidding repurchase of foreign currency bonds." This system was created to be activated immediately in case of problems with dollar liquidity, and it will be implemented when deemed timely, considering factors such as swap market supply and demand conditions and the holdings of securities eligible for foreign currency RP.

This system supplies dollar funds by having the Bank of Korea and the Foreign Exchange Stabilization Fund purchase foreign currency bonds (U.S. Treasury bonds) held by domestic financial institutions under the condition of repurchasing them.

A Bank of Korea official stated, "This system will be activated in a timely manner if deemed necessary, considering the supply and demand situation of the domestic foreign currency fund market. It is expected to contribute to preventing the transmission of funding supply instability to systemic risk in the foreign exchange market when the intermediary function of banks in foreign currency funds deteriorates."

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