The Bank of Korea has decided to temporarily supply an unlimited amount of liquidity to financial institutions to prevent a credit crunch. This is the first time Korea’s central bank is taken such a measure.
The liquidity injections will be made for three months starting April 1. During that time, the BOK will purchase bonds on the local repo market every Tuesday.
The central bank said that although it is hard to predict how much liquidity will actually be provided, the plan is to supply the entire amount requested with no limit. The BOK said that based on market conditions it will consider extending the measure beyond three months.
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