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Eased liquidity rules for banks likely to be further extended

All News 11:25 August 17, 2020

SEOUL, Aug. 17 (Yonhap) -- Eased liquidity rules for banks, effective since April amid a market rout caused by a surge in the number of cases of the new coronavirus, are likely to be extended further as market uncertainty may increase at any time, sources said Monday.

In April, the country eased foreign exchange liquidity rules through September to prod local financial firms to provide more dollars in the currency market roiled by market turbulence.

Local financial institutions have been required to hold an adequate amount of foreign currency assets on hand to get over short-term liquidity disruptions.

Eased liquidity rules for banks likely to be further extended - 1

Under the eased rules, the foreign exchange liquidity coverage ratio (LCR) for banks was set at at least 70 percent.

The FX LCR is measured as high-quality liquid foreign assets to projected net cash outflows over 30 days.

But a recent surge in new virus cases here, coupled with volatile financial markets, is still posing a risk to financial companies, according to the sources.

The sources said the eased liquidity rules may be extended by six months again.

The country has taken series of steps to stem market turmoil and provide a buffer against the fallout from the COVID-19 outbreak.

Also, South Korea struck a US$60 billion currency swap deal with Washington in March for a six-month period, with the deal extended again last month by six months.

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