ID :
26097
Wed, 10/22/2008 - 20:37
Auther :
Shortlink :
https://www.oananews.org//node/26097
The shortlink copeid
Watchdog calls for BOK to buy bonds sold by lenders
SEOUL, Oct. 22 (Yonhap) -- South Korea's financial watchdog said Wednesday the central bank needs to purchase bonds issued by commercial banks in a bid to help them to secure Korean won liquidity.
"If Korean currency liquidity is provided to banks in this way, the yields of
certificates of deposit (CDs) or bank notes would fall and households' burdens
for debt repayment will ease," Rhee Chang-yong, vice president of the Financial
Services Commission (FSC), told reporters.
"The central bank should consider this option as a way to prevent the financial
crisis from hurting the economy."
His remarks came as the Bank of Korea (BOK) said it is considering buying debts
sold by commercial banks as a back-up contingency plan. But the central bank
remains cautious about purchasing such bonds, as they are quite risky compared to
government debts.
According to sources, South Korean lenders have about 25.5 trillion won (US$18.7
billion) worth of bank notes that will reach maturity in the fourth quarter. The
watchdog and local banks asked the BOK to include such bonds in the central
bank's repurchase agreement deals.
Local banks are suffering from cash shortages as they are having troubles raising
funds by selling CDs or debts or rolling over debts amid the global financial
turmoil.
South Korean households are under pressure due to a high level of debts, mostly
home-backed loans, as the slowing economy and the financial turmoil have pinched
pocketbooks. The interest rates of such loans are linked to CDs.
Despite the BOK's rate cut in October, the return on CDs rose to a near
eight-year high of 6.15 percent on Wednesday amid lackluster demand for such
notes. Meanwhile, yields for government bonds have declined on hopes for an
additional rate cut.
The government on Sunday unveiled sweeping measures aimed at providing three-year
state guarantees for banks' foreign debts worth up to $100 billion, and injecting
$30 billion into dollar-starved banks and companies.
The BOK said Tuesday it has decided to buy back currency stabilization bonds
worth 700 billion won before maturity in a bid to provide Korean won liquidity to
the market. Currently, the BOK's repurchase agreement deals cover Treasuries and
currency stabilization bonds.
sooyeon@yna.co.kr
(END)
"If Korean currency liquidity is provided to banks in this way, the yields of
certificates of deposit (CDs) or bank notes would fall and households' burdens
for debt repayment will ease," Rhee Chang-yong, vice president of the Financial
Services Commission (FSC), told reporters.
"The central bank should consider this option as a way to prevent the financial
crisis from hurting the economy."
His remarks came as the Bank of Korea (BOK) said it is considering buying debts
sold by commercial banks as a back-up contingency plan. But the central bank
remains cautious about purchasing such bonds, as they are quite risky compared to
government debts.
According to sources, South Korean lenders have about 25.5 trillion won (US$18.7
billion) worth of bank notes that will reach maturity in the fourth quarter. The
watchdog and local banks asked the BOK to include such bonds in the central
bank's repurchase agreement deals.
Local banks are suffering from cash shortages as they are having troubles raising
funds by selling CDs or debts or rolling over debts amid the global financial
turmoil.
South Korean households are under pressure due to a high level of debts, mostly
home-backed loans, as the slowing economy and the financial turmoil have pinched
pocketbooks. The interest rates of such loans are linked to CDs.
Despite the BOK's rate cut in October, the return on CDs rose to a near
eight-year high of 6.15 percent on Wednesday amid lackluster demand for such
notes. Meanwhile, yields for government bonds have declined on hopes for an
additional rate cut.
The government on Sunday unveiled sweeping measures aimed at providing three-year
state guarantees for banks' foreign debts worth up to $100 billion, and injecting
$30 billion into dollar-starved banks and companies.
The BOK said Tuesday it has decided to buy back currency stabilization bonds
worth 700 billion won before maturity in a bid to provide Korean won liquidity to
the market. Currently, the BOK's repurchase agreement deals cover Treasuries and
currency stabilization bonds.
sooyeon@yna.co.kr
(END)
