SEOUL, Jan. 28 (Yonhap) — The Bank of Korea (BOK) said Thursday it will end a special loan scheme for local banks, brokerages and insurers next month as financial markets have stabilized from the fallout of the pandemic.
In May 2020, the BOK launched the 10 trillion-won (US$8.9 billion) lending program to allow banks, brokerages and insurers to take out loans from the central bank against collateral in a bid to ease their potential funding squeeze.
The BOK’s monetary policy board decided to end the operation of the special loan facility on Feb. 3 without further extension. The bank has so far extended the program by three months twice.
“The decision came as the financial markets have stabilized and liquidity conditions for securities firms and other financial institutions also improved,” the BOK said.
The BOK said it could resume the lending program, depending on market situations.
It marked the first time that, excluding banks, the BOK has directly provided loans to brokerages and insurers.
The banks, brokerages and insurers provide good corporate bonds, including ones rated AA-, which come to maturity within five years, as collateral for the loans.
South Korea has taken a set of measures to minimize the economic fallout of the COVID-19 pandemic on the local financial system.
The steps include the BOK’s “unlimited” purchase of local bonds in repo operations to boost market liquidity.