Improvement and Reorganization of Liquidity-Related Systems... Ensuring Stable Management of Financial Markets
Efforts to Revitalize Domestic Demand to Offset External Sector Weakness
Actively Encouraging Abundant Market Liquidity to Flow into Productive Investments
Kim Yong-beom, First Vice Minister of Strategy and Finance, is delivering opening remarks while presiding over the 'Macroeconomic Financial Meeting' held on the 4th at the Bankers' Hall in Jung-gu, Seoul.
[Asia Economy Reporter Kwangho Lee] Kim Yong-beom, the 1st Vice Minister of the Ministry of Economy and Finance, stated on the 4th, "We have restored the operating limits of securities firms' call borrowings and asset management companies' call loans, which were temporarily relaxed in March to resolve liquidity shortages at securities firms, back to their previous levels."
At the macroeconomic and financial meeting held at the Seoul Banking Hall on the same day, Vice Minister Kim said, "The short-term money market, which had been struggling due to the overlapping surge in funding demand centered on securities firms and the contraction of funding supply at the end of the quarter, is showing a relatively stable appearance."
Vice Minister Kim explained, "Considering that the volatility in the international financial market at the early stage of the COVID-19 outbreak was transmitted to the domestic financial market through derivative-linked securities such as equity-linked securities (ELS), we have strengthened the leverage ratio regulations on securities firms to induce a reduction in the scale of derivative-linked securities and prepared measures to stabilize the derivative-linked securities market."
He added, "Learning from the experience in March, the government has enhanced the management capabilities of banks and non-bank financial institutions conducting various foreign exchange operations to correspond to the foreign exchange risks arising from their operations, and improved and reorganized foreign currency liquidity-related systems to eliminate regulatory blind spots. At the same time, we will respond promptly to risk factors surrounding domestic and international financial markets and make every effort to manage financial market stability."
He continued, "We will also ensure that there is no neglect in resolving funding difficulties in vulnerable low-credit sectors by smoothly operating the low-credit grade corporate bond and commercial paper (CP) purchase institution, the operating fund support program for period industry partner companies, and the issuance of P-CBOs."
Vice Minister Kim emphasized, "In the third quarter of this year, to firmly turn the signals of economic recovery into a definite economic rebound, we will mobilize all policy capabilities with extraordinary determination. First, since the impact of the global economic activity contraction is expected to continue for a considerable period, we will focus on revitalizing domestic demand to offset the external sector's sluggishness."
He also said, "We will promptly implement measures to activate productive investment. We will push forward with amendments to the Fair Trade Act within this year to allow limited ownership of corporate venture capital (CVC) by general holding companies, and select 1,000 national representative companies with innovation and technological capabilities to concentrate financial support such as loans, guarantees, and investments based on a total support capacity of 40 trillion won over three years."
Vice Minister Kim expressed concern, saying, "Although liquidity has expanded worldwide during the COVID-19 crisis response, under the ultra-low interest rate regime and increased economic uncertainty, short-term idle funds waiting for investment are increasing, and there is a phenomenon of fund concentration in some asset markets such as real estate where expected returns are high."
He stated, "While managing the increased market liquidity so that it does not undermine financial market stability, we will devise policy measures to ensure that liquidity flows into sound and productive investment destinations."
In particular, he added, "We will also steadily promote the establishment of the '(tentative name) Korean New Deal Fund' to enable market funds to be invested in the Korean New Deal projects."
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