South Korea’s central bank to provide 3-month ‘unlimited’ liquidity over COVID-19 outbreak

SEOUL (XINHUA) – South Korea’s central bank decided yesterday to provide “unlimited” liquidity to financial institutions for the next three months to help minimise the economic fallout from the COVID-19 outbreak.

The Bank of Korea (BOK) said in a statement that an open bidding will be held once a week by the end of June to offer liquidity to financial institutions “with no limit” through the repurchase agreement (RP) transactions. The first bid is scheduled for April 2.

Through the 91-day RP transactions, the BOK will lend money to financial institutions for 91 days with certain bonds as collateral. Financial institutions and bonds subject to the open market operations were also expanded.

It would be the first time that the central bank provided an unlimited amount of liquidity, according to the BOK.

The unlimited liquidity supply was aimed to help stabilise volatile financial markets and minimise the negative effect from the COVID-19 outbreak, while supporting the government’s stimulus package.

The government announced KRW50 trillion (USD40 billion) worth of emergency stimulus package last week for local businesses and financial markets, doubling it to KRW100 trillion (USD80 billion) earlier this week.