Bank of Korea: "Market Volatility Somewhat Eased, Will Actively Provide Liquidity" (Comprehensive)

Bank of Korea Surprised by Martial Law, "Purchasing RP to Supply Market Liquidity"
Market Stability Better Than During COVID-19 or Legoland Incident

On the morning of the 4th, a press briefing was held at the Bank of Korea in Jung-gu, Seoul, regarding the inspection of the financial foreign exchange market and the implementation of market stabilization measures. From the left: Lee Byung-mok, Director of the Financial Settlement Bureau; Choi Yong-hoon, Director of the Financial Market Bureau; Park Jong-woo, Deputy Governor; Choi Chang-ho, Director of the Monetary Policy Bureau; Yoon Kyung-soo, Director of the International Bureau. (Photo by Bank of Korea)

The Bank of Korea (BOK) assessed that the volatility in our financial market is currently somewhat calming down and announced that it will actively provide liquidity going forward.

On the morning of the 4th, the BOK's Monetary Policy Committee held an emergency meeting regarding the president's declaration and lifting of martial law, and announced that it would begin non-regular repurchase agreement (RP) purchases from that day and expand short-term liquidity supply to the market.

The BOK usually supplies liquidity to the market by regularly purchasing RPs from financial institutions, but given the market instability related to martial law, it intends to quickly stabilize the market through non-regular RP purchases.

The BOK explained that if necessary, it will conduct full allotment RP purchases and carry out sufficient purchases of government bonds and repurchases of Monetary Stabilization Bonds. Additionally, it added industrial finance bonds, small and medium enterprise finance bonds, export-import finance bonds, special bonds issued by nine public institutions, agricultural finance bonds, fisheries finance bonds, and financial bonds under the Banking Act to the list of securities eligible for RP transactions.

Park Jong-woo, Deputy Governor of the BOK, said at a press briefing held immediately after the Monetary Policy Committee meeting, "Our financial market is currently somewhat calming down," adding, "However, since various risk factors remain latent, we will take additional measures as necessary."

He also evaluated that the current level of financial market volatility is stable compared to the 2020 COVID-19 pandemic or the 2022 Legoland incident. Deputy Governor Park emphasized, "We see the current financial market as relatively stable compared to the times of COVID-19 or the Legoland incident. Since monetary policy is being eased through interest rate cuts, concerns about market instability are relatively smaller than during those previous events."

The BOK stated that if necessary, it will also supply foreign currency liquidity through foreign currency RP purchases and actively implement various stabilization measures if the exchange rate fluctuates significantly.

Yoon Kyung-soo, Director of the BOK's International Department, said, "There have been no unusual situations in foreign currency liquidity indicators so far," adding, "Foreign currency liquidity is in a favorable condition."

Choi Yong-hoon, Director of the BOK's Financial Market Department, mentioned, "The BOK will provide short-term liquidity supply measures over several weeks with sufficient time to calm market anxiety."