1.8 Trillion Won '2nd Chaean Fund' PF-ABCP Purchase Begins

Nae Jae-cheol, Chairman of the Korea Financial Investment Association, is delivering a congratulatory speech at the 2020 Gold Age Forum held at the Bankers Hall in Jung-gu, Seoul on the 9th. Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Junho Hwang] The Korea Financial Investment Association announced on the 23rd that the 1.8 trillion KRW-scale ‘PF-ABCP Purchase Program’ will be fully launched starting from the 24th.

The name of the purchase entity (SPC) company is 'Securitization Securities Purchase Program' Co., Ltd., with nine comprehensive financial investment companies participating (Mirae Asset, Meritz, Samsung, Shinhan Investment, Kiwoom, Hana, Korea Investment, NH Investment, KB Securities).

This program will operate until May 30 next year. The comprehensive financial investment companies (25%) will participate as mezzanine investors, while Korea Securities Finance Corporation (25%) and Korea Development Bank (25%) will participate as senior investors.

The purpose of this purchase entity is liquidity support, so to prevent the transfer of non-performing assets, the securities companies applying for purchase will also participate as subordinated investors (at least 25%), and depending on the risk level of the ABCP applied for purchase, collateral will be provided as necessary in a structured manner.

First, the purchase target securities are A2-rated PF-ABCP, with a purchase limit of about 200 billion KRW per securities company. The lead managers (Meritz, Korea Investment, NH Investment) will accept applications weekly for refinancing maturity volumes and purchase accordingly. The purchase interest rate will be determined reflecting market interest rate conditions.

The lead managers received purchase applications for ABCP maturing for refinancing from the 24th to the 2nd of next month as the first purchase schedule. They announced plans to fully purchase the total 293.8 billion KRW applied by five securities companies and execute from the 24th.

Association Chairman Jaecheol Na stated, "Through this program, liquidity concerns of small and medium-sized securities companies are expected to be sufficiently resolved," and added, "We believe that the combined efforts of the government and the Bank of Korea’s active market stabilization measures, along with liquidity supply from Korea Securities Finance Corporation, Korea Development Bank, and the banking sector, will soon alleviate the tightening in the short-term funding market and bond market."

He also urged, "Some institutional investors and general corporations appear to be securing liquidity excessively compared to their necessary funds due to market concerns, and in this process, there is a risk of a vicious cycle where securities company trusts and discretionary funds experience rapid redemptions, increasing instability in the bond market. Therefore, it is necessary to refrain from excessive redemptions."

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