$12 bill. to be released Thursday from S. Korea-U.S. currency swap

Of the 60 billion U.S. dollars made available by the South Korea-U.S. currency swap agreement, 12 billion dollars will be released to the South Korean financial market on Thursday. This is the first 20 percent of the total limit set to be released to the local market, and amounts to three times the initial supply (4 billion dollars) offered during the 2008 global financial crisis.

The Bank of Korea said Sunday that it will supply to the market 12 billion dollars of the funds from its currency swap arrangement with the U.S. Federal Reserve. The fund will be supplied in the form of foreign currency loans through a competitive bidding. The bidding will be held between 10 a.m. and 10:30 a.m. on Tuesday, and the actual funds will be transferred to the borrowers on Thursday. The bidding will be conducted in a “multiple price method” that will apply different interest rates suggested by respective successful bidders.

All banks, including Export Import Bank of Korea, Korea Development Bank and Industrial Bank of Korea, can participate in the bidding, and the Bank of Korea will receive collateral worth 110 percent of foreign currency loans from the borrowers. Government bonds, government guaranteed bonds, and currency stabilization securities will be received as preferred collaterals, but if these are insufficient, bank bonds and mortgage-backed securities issued by the Korea Housing Finance Corporation, and cash in Korean won will also be accepted as collateral.


yunjung@donga.com