Financial Authorities: "Domestic Money Market Showing Signs of Gradual Stabilization"

Bond Market Stabilization Fund 5 Trillion Won Capital Call to be Completed by January Next Year
BOK to Support Contributing Financial Companies with up to 2.5 Trillion Won

[Asia Economy Reporter Sim Nayoung] Financial authorities, together with the financial sector and research institutions, held the '2nd Financial Sector Fund Flow Review Communication Meeting' and assessed that "the recent domestic fund market appears to be somewhat calming down due to expectations of a slowdown in domestic and international monetary tightening and the implementation of consecutive market stabilization measures."

The meeting was attended by representatives from the Financial Services Commission, Bank of Korea, Financial Supervisory Service, Korea Securities Depository, associations (Korea Federation of Banks, Life Insurance Association, Korea Financial Investment Association, Korea Credit Guarantee Fund, Korea Federation of Savings Banks), research institutions (Korea Institute of Finance, Korea Insurance Research Institute, Korea Capital Market Institute), and financial companies from various sectors.

However, considering special fund situations such as year-end settlements and the December U.S. Federal Open Market Committee (FOMC) meeting, it was agreed that maintaining vigilance is necessary, and policy support should continue to ensure market stability.

The Bond Market Stabilization Fund is currently undergoing procedures for an additional capital call of 5 trillion KRW, expected to be completed by January next year. The Bank of Korea also plans to provide liquidity support (up to 2.5 trillion KRW) to participating financial companies.

The Korea Development Bank, Industrial Bank of Korea, and Korea Credit Guarantee Fund are operating corporate bond and CP purchase programs totaling 11 trillion KRW. In particular, starting next year, a 5 trillion KRW Primary Collateralized Bond Obligation (P-CBO) program will be launched to support smooth corporate bond issuance by large, medium, and small enterprises.

The securities firms’ guaranteed PF-ABCP (Project Financing Asset-Backed Commercial Paper) purchase program totaling 1.8 trillion KRW is being supported according to market demand upon maturity, and the construction companies’ guaranteed PF-ABCP purchase program totaling 1 trillion KRW began actual purchases last week. Additionally, purchase demand is being assessed through consultations with construction companies.

Liquidity support for securities firms by Korea Securities Finance is also ongoing, and the Bank of Korea plans to expand repurchase agreement (RP) purchases in December.

During the meeting, the phenomenon of fund flows shifting from risky assets to safe assets within the financial market was discussed. Participants evaluated that since November, excessive concentration and competition have somewhat eased.

The Korea Institute of Finance suggested that to alleviate excessive fund concentration in the banking sector, it is necessary to continue reviewing and promoting restraint in excessive fund acquisition competition, easing liquidity regulations on banks, and inter-sector fund support.