Gov`t Scrambles to Prevent `Black Monday`

Emergency government meetings Sunday sought to prevent escalating tension with North Korea over the sinking of the Cheonan and the southern European fiscal crisis from damaging the domestic financial markets Monday.

The Strategy and Finance Ministry, the Financial Services Commission and the Bank of Korea each held a meeting to check the state of the economy, concentrating on easing investor and public jitters over the sinking and the southern European crisis. The three organizations said both factors will have a limited impact on the domestic economy.

The Finance Ministry held a meeting with the Knowledge Economy Ministry and the central bank. They decided to strengthen concerted efforts to monitor the domestic financial market and take swift emergency measures when necessary.

Vice Finance Minister Yim Jong-ryong said the South Korean economy is fully capable of absorbing external shocks despite the global financial crisis and the Cheonan sinking.

In the central bank’s emergency meeting, the bank decided to take measures to stabilize the domestic financial market, including open market operations if necessary, to help stabilize the stock and foreign exchange markets. In addition, a new monetary task force will supervise stabilizing the markets.

The Financial Services Commission and the Financial Supervisory Service also held an emergency meeting. Financial Services Commission Vice Chairman Kwon Hyouk-se said the risks stemming from the Cheonan sinking will have a limited impact on the domestic economy because the results of the investigation were in line with what the international community expected.

In the financial sector, domestic commercial banks are scurrying to secure foreign exchange to protect themselves from the situation that erupted after the global financial crisis in 2008, when they suffered serious shortages of foreign exchange liquidity due to sudden strains in international financial markets.

Industrial Bank of Korea, Shinhan Bank, Hana Bank and Woori Bank have introduced the “committed line” and decided to raise the ceiling. The line allows the banks to withdraw foreign currencies from partner banks in times of foreign exchange shortages in return for fees.

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