Korea’s top 5 financial groups to inject $67 bn to ease market volatility

[Photo by Yonhap]

South Korea’s top five financial holding companies will inject 95 trillion won ($67 billion) into the country’s money and bond markets by the year-end to help ease liquidity pressure on businesses.

The measures were vowed by leaders of top financial groups ? KB, Hana, Shinhan, Woori, and NH ? in a meeting between Financial Services Commission (FSC) Chairman Kim Joo-hyun on Tuesday.

Of the committed funds, 73 trillion won will be used to expand liquidity and 12 trillion won will go to the country’s bond and securities market stabilization funds, and supply 10 trillion won to banks and other units under the holding companies.

The bank leaders also vowed to refrain from issuing bank bonds and expand fund supply to public enterprises, small merchants, small- and mid-sized enterprises, and large businesses, and purchase commercial papers and repurchase agreements. They will also mobilize all means to stabilize the money market by maintaining the scale of their money market fund operation and credit line on the second-tier financial sector.

The five financial holding companies also agreed to actively expand fund supply to small merchants, SMEs, and large businesses and provide more support to vulnerable borrowers.

“We will expand our key role as loan and fund suppliers so that funds flowing into the bank sector amid high interest rate environment and risk aversion trend move back into the real economy and the financial market,” said Kim Kwang-soo who heads the Korea Federation of Banks. “We will also play the role of a lender society-wise by supporting vulnerable groups.”

FSC Chairman Kim said that the short-term financial market has responded sensitively to “some market shock” which led to uncertainty in the corporate bond market.

Volatility in Korea’s financial market has increased in the past weeks after a default on government-guaranteed debt related to the construction of Legoland’s amusement park in Gangwon Province.

“The situation isn’t aggregating thanks to efforts by the government, the Bank of Korea, and the banking sector,” Kim said, calling for continued efforts and cooperation by market participants for smooth capital flow.

FSC Chairman Kim and the five financial group leaders agreed to hold regular bi-weekly meetings to monitor market conditions and set up channels for regular working-level meetings.

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