Authorities say ready to supply liquidity if necessary


Financial authorities have been striving to restore investor sentiment, downplaying concerns over fiscal woes in Europe and the United States.

The Financial Services Commission and its executive body, the Financial Supervisory Service, held an emergency meeting and decided to draw up necessary market-stabilizing steps after monitoring the financial markets, the FSC said in a statement.

The Bank of Korea, the country’s central bank, also said in a report that it will strengthen its monitoring of the financial markets and provide ample liquidity to the financial system if necessary.

On the other hand, though, some financial officials, including the top regulator, do not rule out the possibility that Korea could suffer longer-than-expected difficulties.

Financial Services Commission Chairman Kim Seok-dong made remarks to placate stock investors by holding a meeting with chief executives in the brokerage industry Tuesday.

“Though (negative) effects on the local markets are inevitable, it is undesirable to be in excessive anxiety,” he told the CEOs of major securities firms.

He predicted that the local markets will eventually overcome the difficulties, saying, “Korea’s fiscal, foreign exchange and financial systems remain sound.”

The chief financial regulator called for the CEOs to actively inform investors at home and abroad of the nation’s stronger structure in key sectors including foreign currency reserves and financial companies with competitive soundness.

Hyundai Securities CEO Choi Kyung-soo, who attended the meeting with the FSC chairman, stressed that the woes are not attributable to domestic factors but to external factors.

Choi appeared to be one of the figures sharing the view of regulatory officials who downplay arguments by some foreign analysts that Korea is one of the most vulnerable markets to European debt crisis.

Among the participants are CEOs of Korea Investment & Securities, Woori Investment & Securities, Mirae Asset Securities, and ING Investment Management Korea.

But Kim reportedly told his staff to brace for possibly long-term difficulties from the current situation.

“As major countries such as the U.S., Japan and China saw their countermeasures against a crisis weaken, the current woes could pose problems to Korea’s real economy sector for a longer-than-expected period,” he was quoted by officials as saying.

He also cast anxiety about banks’ liquidity in terms of foreign capital flows in and out of the country. “Banks should diversify sources in their foreign currency borrowing (amid possible risks of irregular flows).”

Earlier in the day, the FSC held an emergency meeting with the Financial Supervisory Service to map out countermeasures by monitoring daily indices of international markets.

The two major regulatory bodies have decided to establish a hot-line with global investment banks and hold continuous meetings every morning until the markets are normalized.

In addition, the regulators plan to enhance crackdown on fraudulent investors seeking to reap unfair gains by spreading groundless rumors in the stock market.

Meanwhile, Finance Minister Bahk Jae-wan said it is necessary for major countries including Korea to closely coordinate to curb uneasy sentiment over the global economy.

“The markets dislike uncertainties. To remove uncertainties at an early date, there is a need to strengthen international cooperation,” he said at a meeting of economy-related ministers in the day.

His remarks came a day after finance ministers for the Group of 20 countries, including Korea, issued a joint statement which pledged to take all necessary initiatives to support the world’s financial stability.

The KOSPI, which has continued to drop over the week, lost 68.1 points to close at 1,801.35 on the day.

By Kim Yon-se (kys@heraldcorp.com)