SEOUL– South Korea’s financial regulator called Tuesday for cooperation from major banks and other financial entities to ease market jitters over liquidity shortages.
Lee Bok-hyun, chief of the Financial Supervisory Service (FSS), asked for cooperation when he met with top officials of financial institutions, including KB Kookmin, Shinhan Bank and other credit providers, according to his office.
“Financial authorities will take necessary steps for market stabilization at a time when uncertainty has heightened due to risks from home and abroad,” Lee said.
“Financial companies also should beef up their loss-absorbing capacity in preparation for risks, while actively providing funds for normal firms suffering liquidity shortages and taking care of vulnerable debtors,” he added.
The government has taken a series of steps to help ease market jitters that have been heightened in the wake of a default on a municipal government-guaranteed debt raised to construct the Legoland theme park in the eastern province of Gangwon.
Despite the province’s later pledge to fulfill its debt-related obligations, market sentiment has sharply been hurt with corporate bond yields soaring and worries rising for a credit crunch.
The Legoland debacle has added to strains on many businesses already grappling with fast-rising borrowing costs driven up by the central bank’s monetary tightening to tamp down inflation.
The government’s measures include an injection of an additional 50 trillion won (US$35 billion) into the market through massive bond-buying schemes. Local banks have also promised to minimize their bond sales to ease instability.
Earlier in the day, the country’s five large financial groups promised to pump 95 trillion won into the market by year-end.
Source: Yonhap News Agency