ID :
32000
Mon, 11/24/2008 - 21:11
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Shortlink :
https://www.oananews.org//node/32000
The shortlink copeid
BOK to inject up to 5 tln won into bond fund
By Kim Soo-yeon
SEOUL, Nov. 24 (Yonhap) -- South Korea's central bank said Monday it will inject up to 5 trillion won (US$3.33 billion) into an envisioned bond fund aimed at stabilizing the local debt market which is reeling from a credit squeeze.
The Financial Services Commission, the country's financial watchdog, plans to
create a 10-trillion-won fund into which banks, the state pension fund and other
institutional investors would pool money to buy financial and corporate debts.
The state-run Korea Development Bank plans to invest 2 trillion won in the fund.
"The BOK has decided to contribute a maximum of 5 trillion won to the fund or
match up to 50 percent of contributions by financial firms in a bid to help thaw
the frozen debt market," Lee Ju-yeol, a deputy governor at the Bank of Korea
(BOK), told a press conference.
According to the BOK, it basically plans to purchase treasury bonds held by
banks, insurers and securities firms or buy back currency stabilization bonds
before maturity. In turn, those firms will spend the proceeds in investing in the
bond fund. The central bank said it will also buy bonds partly through its
repurchase agreement operations.
A repurchase agreement is a deal whereby one party sells the other a security at
a specified price with a commitment to buy the security back at a later date. It
is the central bank's main method of releasing liquidity into the market in a
credit crunch and siphoning off excess liquidity.
There have been concerns that cash-squeezed local banks may be lukewarm towards
the fund and unload their government bond holdings to secure much-needed cash,
rattling the debt market in the past few weeks.
"The BOK will make efforts to stabilize the financial markets by offering
liquidity in a timely manner," Lee added.
Last week, Lee said the BOK is not considering buying commercial papers held by
companies or certificates of deposit as a way to provide liquidity to the fund,
adding that the government has not asked the central bank to do so.
SEOUL, Nov. 24 (Yonhap) -- South Korea's central bank said Monday it will inject up to 5 trillion won (US$3.33 billion) into an envisioned bond fund aimed at stabilizing the local debt market which is reeling from a credit squeeze.
The Financial Services Commission, the country's financial watchdog, plans to
create a 10-trillion-won fund into which banks, the state pension fund and other
institutional investors would pool money to buy financial and corporate debts.
The state-run Korea Development Bank plans to invest 2 trillion won in the fund.
"The BOK has decided to contribute a maximum of 5 trillion won to the fund or
match up to 50 percent of contributions by financial firms in a bid to help thaw
the frozen debt market," Lee Ju-yeol, a deputy governor at the Bank of Korea
(BOK), told a press conference.
According to the BOK, it basically plans to purchase treasury bonds held by
banks, insurers and securities firms or buy back currency stabilization bonds
before maturity. In turn, those firms will spend the proceeds in investing in the
bond fund. The central bank said it will also buy bonds partly through its
repurchase agreement operations.
A repurchase agreement is a deal whereby one party sells the other a security at
a specified price with a commitment to buy the security back at a later date. It
is the central bank's main method of releasing liquidity into the market in a
credit crunch and siphoning off excess liquidity.
There have been concerns that cash-squeezed local banks may be lukewarm towards
the fund and unload their government bond holdings to secure much-needed cash,
rattling the debt market in the past few weeks.
"The BOK will make efforts to stabilize the financial markets by offering
liquidity in a timely manner," Lee added.
Last week, Lee said the BOK is not considering buying commercial papers held by
companies or certificates of deposit as a way to provide liquidity to the fund,
adding that the government has not asked the central bank to do so.
