[Asia Economy Reporter Eunbyeol Kim] The Bank of Korea announced that it will extend the operation period of the 'Financial Stability Special Loan Program,' which provides loans secured by high-quality corporate bonds (AA- or higher) held by financial companies such as banks, securities firms, and insurance companies, by an additional three months. Although no financial institutions have borrowed through this program so far, the Bank decided to extend the program further due to the ongoing COVID-19 crisis and continued market instability.
At the Monetary Policy Committee meeting on the 29th, the Bank of Korea resolved to extend the operation of the 'Financial Stability Special Loan Program,' which provides loans secured by high-quality corporate bonds issued by general corporations to banks and non-bank financial institutions for up to six months, until February 3, 2021, for an additional three months. The total loan limit is 10 trillion won.
The Financial Stability Special Loan Program is a 'safety measure' designed to prepare for situations where financial companies face difficulties in raising funds during a crisis. When corporate bonds meeting the criteria are provided as collateral, borrowing from the Bank of Korea is possible at any time. The collateral target is high-grade (AA- or higher) corporate bonds issued by general corporations with a remaining maturity of five years or less. The loan interest rate is set at the Monetary Stabilization Bond (182-day) rate plus 0.85 percentage points.
The Bank of Korea first implemented this program in May, initially planning to operate it temporarily for three months until August. At the end of July, the operation period was extended for the first time by three months, and this time it has been extended for the second time.
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