Financial institution of Korea Gov. Rhee Chang-yong, heart, bangs the gavel to open a Financial Coverage Committee assembly on the central financial institution in Seoul, Nov. 27. Joint Press Corps
The Financial institution of Korea (BOK) stated Sunday it has determined to supply emergency liquidity to monetary establishments by accepting their mortgage property as collateral within the occasion of large-scale deposit withdrawals or different liquidity crises.
Underneath the brand new rule authorised by the BOK Financial Coverage Board, the central financial institution will be capable of provide further emergency funding backed by mortgage receivables, if deemed obligatory, along with its current lending program collateralized by marketable securities.
Presently, the BOK gives funds solely towards marketable securities held by monetary establishments when liquidity stress takes place.
“There have been rising liquidity dangers as a result of accelerating digitalization of finance, and the necessity to strengthen liquidity backstops has grown,” the BOK stated in a launch.
Loans account for the biggest share of economic establishments’ property, and utilizing them as collateral can function an efficient software in responding to extreme liquidity shocks, it added.
As of end-June, loans accounted for 69.8 p.c of whole property by banks, in contrast with 18.6 p.c for marketable securities.
The brand new rule is predicted to take impact subsequent month, and the BOK plans to conduct simulations and set up associated methods to make sure fast implementation throughout emergencies, officers stated.
