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(LEAD) BOK to launch special loan scheme for banks, brokerages, insurers

Finance 16:31 April 16, 2020

(ATTN: UPDATES throughout with details; CHANGES headline)

SEOUL, April 16 (Yonhap) -- South Korea's central bank said Thursday it will launch a special loan scheme that allows local banks, brokerages and insurers to help fend off a possible funding crunch and easily access credit amid the coronavirus pandemic.

Under the special loan program of 10 trillion won (US$8.1 billion), which will begin from May 4 for three months, local banks, brokerages and insurers can take out special loans against collateral from the Bank of Korea (BOK).

The collateral includes AA- rated corporate bonds, the BOK said, adding that the program is expected to help stabilize the corporate bond market.

Excluding banks, it is the first time that the BOK will directly make loans to brokerages and insurers.

The special loan facility carries an interest rate of 85 basis points above that of 182-day Monetary Stabilization Bonds, the BOK said.

The BOK said it could increase the size of the loan program or extend the program, depending on market situations.

(LEAD) BOK to launch special loan scheme for banks, brokerages, insurers - 1

South Korea's financial authorities have swiftly taken measures to minimize the economic fallout of the coronavirus on financial markets.

Steps taken by the BOK against the coronavirus pandemic include the "unlimited" purchase of local bonds in repo operations to boost market liquidity.

The BOK also added mortgage-backed securities and special bank bonds, or certificates of deposit, to the list of bonds it can purchase to help boost market liquidity.

"The BOK is aware of market concerns over the amount of corporate bonds and commercial papers (CPs) set to mature in April, which is relatively large, but it believes there will not be a serious problem in refinancing the debts, considering the demand of the market itself for corporate bonds and CPs, the expansion of market liquidity by the central bank and the size of the market stabilization fund to be created (at 20 trillion won)," the BOK said earlier.
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