Korea-Switzerland Extends 11.2 Trillion Won Currency Swap... Contract Period Expanded to 5 Years

Swiss Franc [Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] The Bank of Korea announced on the 1st that it has signed an extension agreement for the currency swap with the Swiss National Bank.

The won-Swiss franc currency swap agreement, which was scheduled to expire on March 1, 2021, remains at 10 billion Swiss francs (11.2 trillion won), but the purpose of the currency swap has been broadly defined as "strengthening financial cooperation between the two countries and revitalizing the functions of the financial market." The previous purpose of the currency swap agreement between the two countries was "strengthening financial cooperation between the two countries." The contract period has also been extended from the previous 3 years to 5 years.

A currency swap agreement is a mechanism where, in an emergency, a country deposits its own currency and borrows the other country's currency or dollars. Switzerland is one of the six major reserve currency countries (United States, Eurozone, United Kingdom, Canada, Switzerland, Japan). The Bank of Korea evaluated that "by renewing the currency swap, the safety net in the foreign exchange sector available during financial crises has been further strengthened."

As of the 1st, except for Canada, which has no pre-set limit, the Bank of Korea has currency swap agreements worth a total of approximately 196.2 billion dollars. It has agreements with eight countries including the United States (60 billion dollars), China (approximately 5.9 billion dollars), Canada (no pre-set limit), Australia (approximately 8.1 billion dollars), Malaysia (approximately 4.7 billion dollars), Indonesia (approximately 10 billion dollars), and the United Arab Emirates (approximately 5.4 billion dollars). The multilateral currency swap (CMIM) is in place with ASEAN (Association of Southeast Asian Nations) + 3 countries (38.4 billion dollars, 13 countries).