Central Bank Begins to Purchase Repurchase Agreements
The Bank of Korea announced on March 25 that it would shoulder about half of the government’s 100 trillion won financial assistance for enterprises and yet details of its spending are yet to be determined.
The central bank already began to purchase repurchase agreements from securities companies on March 24 for the purpose of bond and stock market stabilization and corporate credit crunch prevention. The volume of the purchase already reached 2.5 trillion won.
The Bank of Korea is cautious about using its issuing power for financial market stabilization. Although the central bank is not going to directly purchase corporate bonds and commercial papers, it is planning to consider directly and additionally purchasing repurchase agreements on condition of government guarantee.
The details of the central bank’s liquidity supply in the government’s financial market stabilization measures are likely to be determined before April 1, when the latter’s bond market stabilization fund is scheduled to be launched. Earlier, the Financial Services Commission explained that half of the 100 trillion won assistance will be borne by government-run financial institutions and the financial sector, the central bank will be responsible for the other half, and subsequent potential losses will be covered on the fiscal side.