SEOUL, March 26 (Reuters) – South Korea on Thursday said it plans to loosen the foreign exchange liquidity coverage ratio (LCR) for banks for three months to encourage them to supply more dollars into local markets as the coronavirus jolts the global financial system.
Vice finance minister Kim Yong-beom said the FX LCR will be relaxed to 70% from the current 80% until May-end, meaning banks will be required to hold less of easy-to-sell foreign assets that can readily be converted into cash in times of stress.
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Kim also said the government expects FX reserves to be reduced temporarily as part of it will be used to ease liquidity shortages in companies and financial institutions. (Reporting by Cynthia Kim Editing by Shri Navaratnam)