Nae Jae-cheol, Chairman of the Korea Financial Investment Association, Meets with Bank of Korea Governor to Request 'Capital Market Stabilization Measures'

Nae Jae-cheol, Chairman of the Korea Financial Investment Association
[Photo by Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Recently, as the corporate bond market has tightened due to interest rate hikes and the Legoland asset-backed commercial paper (ABCP) crisis, liquidity issues have also emerged among securities firms and asset management companies, prompting the industry to call for market stabilization measures.

According to the Korea Financial Investment Association on the 20th, Na Jae-cheol, chairman of the association, met with Lee Chang-yong, governor of the Bank of Korea, on the 18th to exchange views on related issues.

At the meeting, Chairman Na explained the difficulties faced by securities firms and asset management companies due to liquidity tightening in the corporate bond market and reportedly proposed the reintroduction of the 'Financial Stability Special Loan' that the Bank of Korea implemented immediately after the COVID-19 outbreak.

The Financial Stability Special Loan system is a standby credit facility that allows borrowing from the Bank of Korea at any time by providing eligible corporate bonds as collateral.

Chairman Na also reportedly urged the Bank of Korea to pay attention to the smooth circulation of A-rated corporate bonds, which are marginalized within the corporate bond market.

Recently, there has been a phenomenon where A-rated corporate bonds, which fall between high-credit AA-rated bonds and high-yield bonds with lower credit ratings but higher returns, are not being properly absorbed in the market.

Earlier, Chairman Na was also reported to have proposed market stabilization measures to Kim Joo-hyun, chairman of the Financial Services Commission, at an event the previous day. On the 12th, he also held an emergency meeting titled 'Discussion on Securities Market Issues' with Sohn Byung-doo, chairman of the Korea Exchange, and others.

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