Financial Associated Press, October 23 (Editor Shi Zhengcheng)According to Yonhap News Agency and other media reports, a group of financial regulators, including the Bank of Korea and the Ministry of Finance, held a meeting on Sunday to study the financial market situation and announced a series of liquidity support measures.
Choo Kyung-ho, the South Korean government’s deputy prime minister in charge of the economy and minister of finance, told a news conference after the emergency meeting,In response to growing concerns in corporate debt and short-term money markets, and to prevent a liquidity crunch, the South Korean government has decided to expand the existing market stabilization fund to 50 trillion won (about 253.4 billion yuan) or more.
Qiu Qinghao said,South Korean government and central bank agree that the current market situation is very dire, and if needed, we will mobilize all available policy measures to address market anxiety.Starting tomorrow (next Monday), the South Korean government will launch a bond stabilization fund worth 1.6 trillion won, and“Actively buy” corporate bonds and commercial papers。
In order to follow the Fed’s rate hike cycle and curb domestic inflation, the Bank of Korea has raised interest rates by 250 basis points since August last year. Affected by this, as of the official quotation at the close on Friday, the 91-day commercial paper rate has also soared from 1.55% at the beginning of the year to 4.25%, which is also a new high after the last round of the global financial crisis. It also means the spread between the commercial paper rate and the central bank’s policy rate has widened to 125 basis points from less than 50 basis points at the start of the year.
In the context of a tightening financing environment, the “Lego Park developer default” also accelerated the slide of the Korean financial market into disorder.
Iwon Jeil Cha, a special-purpose vehicle set up by Gangwon-do Nakajima Development Corporation (GJC) as a financing vehicle for the construction of Lego Park in Gangwon-do, South Korea, missed the payment date of a 200 billion won bond last month and subsequently declared bankruptcy. The Gangwon-do government, which holds a 44% stake in GJC, initially said that in order to reduce government debt, it would not fulfill its guarantee obligations and the company would be taken over by a court.
With financial markets rapidly under pressure,The Gangwon-do government announced last week that it had withdrawn the decision, and the payment will be made by the end of January next year.。
A number of market stabilization plans were launched together
In addition to announcing the launch of the Bond Stabilization Fund, the Korean government has also placed state-owned banks (KDB, KIB, etc.)The upper limit for purchasing corporate bonds doubled from 8 trillion won to 16 trillion won。
At the same time, the South Korean government will also provide 3 trillion won to the Korea Securities and Finance Corporation (KSFC) toProvide liquidity to brokerages stressed by Project Finance Asset Securitization Notes (PF-ABCP)。
The Korea Housing and Urban Security Corporation and the Korea Real Estate Finance Corporation will each contribute 5 trillion won to theSupport financing schemes for real estate projects that are generally stable but facing a short-term liquidity crisis。
In addition to Choo Kyung-ho and Bank of Korea Governor Lee Chang-yong, the top leaders of Korea’s Financial Services Commission and Financial Supervisory Service, as well as Choi Sang-mok, chief economic secretary at the Presidential Office, also attended Sunday’s meeting.