Financial Authorities Extend Bank LCR Relaxation Until March Next Year
by Kim Hyojin
Published 26 Aug.2020 16:37(KST)
Updated 26 Aug.2020 17:10(KST)
Eun Sung-soo "Announcement on Loan Maturity Extension Coming Soon"
[Asia Economy Reporter Kim Hyo-jin] Financial authorities have decided to extend certain regulatory relief measures on financial companies to provide active financial support amid the spread of the novel coronavirus infection (COVID-19).
The Financial Services Commission and the Financial Supervisory Service announced on the 26th at the regular FSC meeting that they would extend and supplement the "Financial Regulation Flexibility Plan" with such content.
Accordingly, the easing of banks' foreign currency Liquidity Coverage Ratio (LCR) (from 80% to 70%) and the integrated LCR easing (from 100% to 85%), which was originally set to last until the end of next month, will be extended until the end of March next year.
The LCR is the ratio of high-liquidity assets to the expected net cash outflows over the next 30 days. It is a regulation to prepare for situations where a large amount of funds temporarily outflows during financial crises, etc. Lowering the LCR regulatory standard increases banks' lending capacity.
The deadline for the credit risk value reduction (from 0~32% to 0~16%) on corporate loans newly acquired by comprehensive financial investment business operators will also be extended by three months until the end of this year.
The measure allowing securities companies to apply counterparty-specific credit risk values (0~32%) instead of deducting newly acquired corporate loan receivables from operating net capital (risk value 100%) will likewise be extended until the end of this year.
The easing of KDB Industrial Bank's Net Stable Funding Ratio (NSFR; the ratio of available stable funding to required stable funding) regulation will also be expanded.
Originally, violations within a 10 percentage point range were allowed until June next year, but this range will be increased to 20 percentage points. The deadline has also been extended until June next year.
Meanwhile, Eun Sung-soo, Chairman of the Financial Services Commission, said, "Through continuous consultations with the financial sector, a consensus has been formed to extend the loan maturity extension and interest repayment deferral measures as per the existing plan, and an announcement regarding the extension direction will be made soon."
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