Seoul set to announce additional measures to boost liquidity

SEOUL, Oct. 26 (Yonhap) -- The central bank is expected to announce new measures to stabilize the wobbling financial markets, official sources said Sunday.

The Bank of Korea (BOK) will likely announce soon that it will buy bonds issued
by liquidity-starved local banks through repurchase agreements, according to the
sources.
Last week, the BOK said it would inject 2 trillion won (US$1.38 billion) to
institutional investors via repurchase agreements to provide emergency liquidity,
as part of efforts to stabilize the financial market.
It is common practice for the central bank to adjust the amount of money
available in the financial system through repurchase agreement operations. The
sale of repurchase agreements, or repos, reduces funds in the system, while the
purchase of repos adds money.
In a related move, the nation's financial regulator is expected to ease liquidity
requirements for local banks in a bid to boost cash holdings by lenders, the
officials said.
Earlier this month, South Korea pledged $130 billion to support local lenders.
South Korean banks are suffering as the credit crunch has sapped their access to
foreign funds. The government said it will also spend as much as 8 trillion won
to rescue builders burdened by unsold homes.
Seoul's key stock index plunged more than 20 percent last week to its lowest
close since May 2005 on growing concerns about economic slowdown and deepening
global financial instability.
The economy expanded a seasonally adjusted 0.6 percent in the third quarter
compared with the previous three months, marking the slowest pace in four years.
Earlier this month, the central bank cut its key interest rate by 25 basis points
to 5 percent, the first reduction since late 2004. It has given signs recently
that it may make another cut in coming months to boost market liquidity.
sam@yna.co.kr
(END)