▲ Finance Minister Choo Kyung-ho (front) enters an emergency economic meeting in Seoul on Oct. 23, 2022. The meeting brought together Kim Joo-hyun (L), the chair of the Financial Services Commission; Choi Sang-mok (2nd from L), senior presidential secretary for economic affairs; Bank of Korea Gov. Rhee Chang-yong (2nd from R) and Lee Bok-hyun, chief of the Financial Supervisory Service, for discussion on ways to rein in market jitters stemming from a default on debt linked to the construction of the Legoland theme park in Chuncheon, Gangwon Province. (Yonhap)

BOK loans-collateral

BOK to broaden forms of collateral it accepts to make loans

SEOUL, Oct. 27 (Yonhap) -- The Bank of Korea (BOK) said Thursday that it has decided to include bank debentures and debt issued by nine state-run companies on a list of collateral it accepts for making loans in the latest move to inject liquidity and ease jitters over a credit crunch.

The inclusion will be effective for three months starting from next Tuesday, according to the central bank.

The BOK has accepted as collateral for making loans to commercial banks such top-rated bonds as Treasurys, monetary stabilization bonds and government-guaranteed debt.

The decision came as the local bond market has been freezing in the wake of an unexpected recent default on a municipal government-guaranteed debt sold to construct a theme park in the eastern province of Gangwon.

The Gangwon government later vowed to fulfill its obligations linked to the debt but has heightened market jitters, causing bond yields to soar and making it harder for businesses to secure necessary funds.

The BOK's decision to widen its list of collateral marked the latest in a series of steps to stabilize the bond market.

On Sunday, the government decided to inject additional 50 trillion won (US$35 billion) worth of liquidity, including large-scale bond-buying schemes.

On Wednesday, the Financial Services Commission said that five major banks agreed to minimize the bond sales to help stabilize the bond and short-term money markets.

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