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| 한국은행 본관. 사진=한국은행 홈페이지 |
[Alpha Biz=(Chicago) Reporter Kim Jisun] According to the "Report on Financial Stability (March 2023)" released by the Bank of Korea on the 23rd, the Bank of Korea conducted a "foreign currency liquidity stress test" that assumed the impact of a sudden foreign currency outflow to check the status of foreign currency liquidity, and found that the risk of foreign currency liquidity could expand in some non-banking financial institutions.
The Bank of Korea examined the risk of possible foreign currency outflow in case of extreme situations (probability in the bottom 5%) under the current financial and economic conditions by using the financial instability index (FSI), which takes into account factors such as the stock market and exchange rate volatility, and the trade balance against GDP.
It estimated the size of foreign currency assets that can be secured by holding securities (discount rate applied), cash and deposits, loans (including RP, calls, etc.), and swap maturity.
As a result, even if a large-scale outflow of foreign currency funds occurs, it is estimated that domestic financial institutions generally have extra foreign currency funds (supplied amount-supplied amount), which is tolerable.
However, if volatility in the global financial market increases and difficulties in raising foreign currency funds intensify, there is a possibility that foreign currency liquidity risks may expand in some non-banking financial institutions.
As a result of its own calculation by the Bank of Korea, the outflow compared to the amount of foreign currency funds secured was about 40% for domestic banks and 38% for foreign banks, while for non-banking banks, there were about 80% for securities, about 25% for credit finance companies, and about 5% for insurance. The closer this ratio is to 100%, the less foreign currency liquidity capacity. If it exceeds 100%, it can be seen that the outflow is higher than the secured amount.
The Bank of Korea, however, stressed that the foreign currency liquidity situation is good as a whole in the financial system.
According to the Bank of Korea, the foreign currency liquidity coverage ratio (LCR) of domestic banks stood at 132.5% in January this year, far exceeding regulatory standards (80%).
"However, there is a possibility that some non-banking financial institutions may have a weak ability to respond in the event of a severe shock of foreign currency liquidity," the Bank of Korea said. "Non-banking financial institutions should continue to conduct inspections such as stress tests, while non-banking financial institutions should strengthen their efforts to expand borrowing agreements available in the event of a crisis." ．
AlphaBIZ 김지선(stockmk2020@alphabiz.co.kr)
