Financial Services Commission Reviews Market Stability in Banking Sector Following LCR Normalization Grace Period

[Asia Economy Reporter Song Hwajeong] It has been revealed that the financial authorities' temporary exemption from normalizing the banks' consolidated Liquidity Coverage Ratio (LCR) has expanded the banks' capacity to supply funds.

On the 26th, the Financial Services Commission held the 2nd Financial Market Inspection Meeting for the banking sector together with the Financial Supervisory Service and vice presidents of five major banks: Kookmin, Shinhan, Hana, Woori, and Nonghyup Bank.

At the meeting, they reviewed the banks' contributions to market stability following the decision at the 1st inspection meeting on the 20th to postpone the normalization of the consolidated LCR regulatory ratio for six months.

The banking sector stated that, supported by the LCR normalization exemption, their capacity to supply funds for financial market stability has expanded, and they will strengthen efforts to stabilize the market.

The banks plan to promote the purchase of commercial paper (CP), asset-backed commercial paper (ABCP), and short-term bonds to stabilize the short-term funding and bond markets, and to supply liquidity through repurchase agreement (RP) purchases and money market fund (MMF) operations. Additionally, they presented plans to promptly respond to capital calls from the Bond Market Stabilization Fund and minimize the issuance of bank bonds. They also announced continued support to facilitate corporate sector funding through purchases of special bank bonds such as San-geum bonds, corporate loans, and maintenance of credit lines.

The financial authorities urged the banking sector to serve as a pillar for financial market stability and stated that they will continue to strengthen communication with the field and monitor market conditions going forward.

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