PF-ABCP Janggi Daechul Jeonhwan Bojeung Chulsi This Month

Financial Services Commission Holds Financial Market Review Meeting

[Asia Economy Reporter Yoo Je-hoon] Financial authorities will establish and operate a business guarantee to support the conversion of real estate project financing asset-backed commercial paper (PF-ABCP) into long-term loans within this month.

On the morning of the 12th, the Financial Services Commission held a financial market status review meeting chaired by Vice Chairman Kim So-young. Attendees included the Financial Services Commission, Financial Supervisory Service, Korea Development Bank, Industrial Bank of Korea, and Korea Credit Guarantee Fund. The meeting reviewed trends in the short-term funding market such as corporate bonds and commercial paper (CP), assessed the performance of market stabilization support measures, and shared plans for market stabilization support for this year.

Participants evaluated that the recent downward trend in corporate bond and CP interest rates continues, with demand for high-quality issues exceeding issuance volume, showing clear improvement. They also agreed on the need to continue actively implementing the market stabilization program to further solidify the recent market stability and to strengthen support for non-investment grade corporate bonds and CP to spread stability to lower-rated issues.

According to the Financial Services Commission, the currently operating market stabilization program has a support capacity of over KRW 40 trillion. Accordingly, the authorities plan to actively operate this program going forward. The Bond Market Stabilization Fund (support capacity of KRW 6.4 trillion) will continue to support market demand centered on high-quality issues while expanding the scope and scale of support depending on market conditions.

The Korea Development Bank and Industrial Bank of Korea’s corporate bond and CP purchase program (KRW 7.6 trillion) will continue to actively purchase mainly non-investment grade corporate bonds, and the Korea Credit Guarantee Fund’s primary collateralized bond obligation (P-CBO) will be expanded and reorganized to newly supply KRW 5 trillion while broadening the support targets. The securities firms and construction companies’ guaranteed PF-ABCP purchase programs (KRW 1.3 trillion and KRW 900 billion respectively) will also continue to receive support.

In addition, the authorities plan to newly establish and operate within this month a business guarantee to convert short-term PF-ABCP into long-term loans, along with a business guarantee (KRW 12.9 trillion) supporting the conversion of bridge loans to PF. Vice Chairman Kim stated, "It is necessary to actively operate the currently running market stabilization program to further spread the current market stability," adding, "Especially regarding real estate PF, it is important to carefully review in advance together with related agencies, industry, and market experts."