SEOUL, Nov. 1 (Korea Bizwire) – South Korea’s five large financial groups decided Tuesday to inject a large amount of liquidity into the financial market to help ease its recent volatility.
The decision to pump 95 trillion won (US$66.5 billion) into the market by year-end came after the country’s top financial regulator met with the heads of those institutions, including KB Financial Group Inc., to ask for their cooperation.
It includes 73 trillion won in expanded liquidity into the market and 12 trillion won into the country’s bond and securities market stabilization funds. An additional 10 trillion won will be provided to subsidiaries of those financial holding companies.
The money will thus be used to purchase corporate bonds and other debt, and provide more funds to state firms, small merchants and businesses.
Kim Joo-hyeon, chair of the Financial Services Commission (FSC), called on the chiefs of the financial groups to help stabilize the financial market.
“The financial market is showing signs of leveling off thanks to measures by the government, the central bank and commercial lenders,” he said. “Market participants’ cooperation is needed to make government-led steps effective.”
Kim said the fund injection is necessary, considering the spreading uncertainties in the market.
He said the Bank of Korea will make appropriate moves in light of the market crunch.
The chairs of the financial groups echoed Kim’s view, vowing to make efforts to help stabilize the local financial market.
“We understand that the financial market is under severe pressure and are aware of our responsibilities as key players,” said Ham Young-joo, the chief of Hana Financial Group.
“There are many firms under temporary liquidity crunch, and we are willing to support them.”
The move came as the country’s financial market volatility has been mounting in the wake of a recent default on a municipal government-guaranteed debt raised to finance the construction of the Legoland theme park in the eastern province of Gangwon.
Last week, the financial authorities urged 10 major institutional investors, including the National Pension Service, to cooperate in easing market swings by refraining from excessive “trend-following” trading and fund redemption.
To help stabilize the market that has been shaken by the so-called Legoland theme park debacle, the government has taken a series of steps, including the injection of 50 trillion won worth of liquidity.
“Local markets seem to have reacted sensitively to the risks from inflation and economic slowdown, compared with the global economy,” KB Financial Group chief Yoon Jong-gyu said.
Shinhan Financial Group chief Cho Yong-byoung also said continued market volatility eventually will incur solidity problems among financial institutions as well.”