Watchdog urges central bank to take more action

SEOUL, Nov. 20 (Yonhap) -- South Korea's top financial regulator said Thursday
the central bank needs to consider buying commercial papers and cutting its key
interest rates in a bid to ease a corporate funding squeeze.
"To help ease tightened credit conditions, the Bank of Korea (BOK) should
aggressively consider purchasing commercial papers issued by companies," Jun
Kwang-woo, chairman of the Financial Services Commission (FSC), told reporters
during his visit to New York. "If the BOK actively cuts the policy rate to around
2 percent, market conditions may improve."
His remarks came as President Lee Myung-bak called for the watchdog to draw up
measures to bring down market interest rates to match the falling policy rate.
In November, the BOK slashed its key interest rate for the third time in a month
to bolster the slowing economy. In a monthly policy meeting, the BOK lowered the
benchmark seven-day repo rate by a quarter percentage point to 4 percent, cutting
a combined 1.25 percentage point in the span of a month.
Despite the BOK's steep rate cuts, market interest rates have not fallen as
expected. Higher market rates are taking a toll on households and smaller
companies which are struggling to service their debts amid the global financial
turmoil and the economic slowdown.
The FSC also plans to set up a 10-trillion-won (US$6.8 billion) fund into which
existing institutional bond investors, such as banks and the state pension fund,
would pool money with the aim of buying a wide range of bonds, including
corporate debt.
sooyeon@yna.co.kr
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