Financial Authorities: "Gradual Resumption of Bank Bond Issuance Focused on Refinancing"

Maturity Amount of 2.3 Trillion Won by Year-End... "Flexible Response to Next Year's Maturities Based on Market Conditions"

[Asia Economy Reporter Yu Je-hoon] The banking sector will gradually resume issuing bank bonds, which it had refrained from to stabilize the bond market.

On the morning of the 19th, the Financial Services Commission, the Financial Supervisory Service, and the Bank of Korea held the "3rd Financial Sector Fund Flow Inspection and Communication Meeting" at the Korea Federation of Banks in Jung-gu, Seoul, chaired by Standing Commissioner Kwon Dae-young. They announced, "For the time being, the banking sector will gradually resume issuing bank bonds while communicating with financial authorities at a level that does not burden the market."

At the meeting, participants assessed that the financial market is gradually regaining stability, noting that corporate bond and commercial paper (CP) interest rates have shown a downward stabilization trend and volatility in the foreign exchange market has eased. This was attributed to the five major financial holding companies supplying liquidity of 95 trillion won, followed by the financial authorities' request to minimize bank bond issuance.

Accordingly, the meeting discussed plans to resume bank bond issuance by the banking sector, which had been requested to refrain from it until now. The banking sector stated, "There is various demand for bank bond issuance to respond to existing bank bond maturities, deposit outflows, and corporate loan expansion," adding, "Considering the trend of bond market stabilization and the banking sector's need for year-end funding and management, it is necessary to gradually resume bank bond issuance at least for refinancing maturing bonds."

According to the authorities, the amount of bank bonds maturing at commercial banks from now until the end of this month reaches about 2.3 trillion won. The banking sector plans to prioritize refinancing issuance for maturing bonds until the end of the year and to flexibly proceed with bank bond issuance by dispersing and adjusting the timing and scale of issuance for maturities in January next year and thereafter, depending on market conditions.

The financial authorities also plan to closely monitor the impact of bank bond issuance on the bond market until the end of the year and early next year, managing issuance flexibly according to market conditions while communicating with the banking sector. Additionally, to minimize the market-building effect on credit finance bonds and general corporate bonds, they intend to actively and flexibly operate the Bond Market Stabilization Fund and corporate bond and CP purchase programs.

The financial authorities stated, "We will continue to communicate with financial sectors and market experts to stabilize the bond market and short-term funding market, and considering the year-end funding market situation, we will monitor and manage to prevent fund concentration caused by retirement pension transfers, reverse money moves, and funding competition," adding, "Furthermore, to prepare for domestic and external uncertainties, we will thoroughly supervise banks and financial institutions to ensure sufficient loss absorption capacity and liquidity, and closely inspect and respond to corporate funding conditions and the real estate finance sector."

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