The South Korean government announced on March 25 that levies for foreign currency soundness will be temporarily exempted so that financial companies’ foreign currency borrowing costs can be reduced, foreign currency liquidity coverage ratio requirements will be temporarily loosened from 80 percent, and an emergency financial assistance of 20 trillion won will be provided for exporters, importers and companies doing business abroad.
“The levies and requirements were introduced after the global financial crisis of 2008 for the purpose of preventing excessive foreign currency capital inflow and outflow,” Deputy Prime Minister Hong Nam-ki said at a government meeting that day, adding, “We will relax the regulations in line with the current situation so that foreign currency supply to the private sector can be facilitated.”
The deputy prime minister also remarked that liquidity supply to the foreign currency swap market will be continuously expanded so that currency supply and demand can be more stabilized in the market. “Foreign currency liquidity necessary for the corporate and financial sectors will be supplied promptly and sufficiently by means of the foreign exchange reserves and the currency swap agreement with the United States,” he explained.
The emergency financial assistance, in the meantime, is going to be provided via the Export-Import Bank of Korea. The amount is divided into 8.7 trillion won of new liquidity and 11.3 trillion won subject to loan maturity extension of up to one year. Existing loan guarantee programs will be used for the new liquidity along with 2.2 trillion won of new loans and 2.5 trillion won of guarantee support.