BOK supplies 2 tln won to financial system

SEOUL, Nov. 21 (Yonhap) -- South Korea's central bank supplied 2 trillion won (US$1.32 billion) in liquidity to the financial system on Friday by buying bank and other special bonds through an auction of repurchase agreements in an effort to ease a credit crunch.

The Bank of Korea (BOK) said it signed 28-day repurchasing agreements with
successful bidders, with an average interest rate of 4.14 percent. Prospective
borrowers bid 2.1 trillion won on offer.
It was the second move by the BOK to buy bank bonds since Nov. 11. In late
October, the BOK decided to include bank bonds and some special debts as
collateral for its open market operations in a bid to stabilize the market.
The central bank said it bought 893.3 billion won in bank bonds through the
auction, causing its combined purchases of such debt to reach 1.65 trillion won
as of Friday.
The BOK usually buys financial institutions' bond holdings or sells its own bond
holdings to them via repurchase agreements, which require the institutions to
repurchase or resell them at a later date.
The repurchase agreement is the central bank's main method of releasing liquidity
into the market in a credit crunch and siphoning off excess liquidity.
The move comes two days after BOK Gov. Lee Seong-tae said the central bank will
actively provide short-term liquidity in a bid to help the money market operate
smoothly.