Lee Chang-yong's 'Sleepless Night'... Han Eun's 'Temporary Financial Committee' Last Minute [Jin-kyu Kang's BOK Watch]

'5-Person Financial Committee' First in 12 Years

On the night of the 3rd, after an emergency economic and financial situation meeting, Lee Chang-yong, the Governor of the Bank of Korea, held a meeting at the Seoul Bank Hall with top officials including the Minister of Planning and Finance, the Chairman of the Financial Services Commission, and the Chairman of the Financial Supervisory Service, known as the 'F4' meeting. After about 15 minutes, they moved to the main office of the Bank of Korea.

The Governor gathered major officials from the financial and foreign exchange market departments of Han Eun. Deputy governors and national heads came out of their homes and entered the main building one after another. They immediately conducted an emergency meeting to check the market situation and prepare countermeasures.

Lee Chang-yong's Sleepless Night

The Governor was cautious in preparing countermeasures with officials, including Park Jong-woo, Deputy Governor, who is in charge of monetary policy and the financial market. They decided to hold a meeting on the morning of the 4th to check the situation with all officials present.

Afterwards, they discussed measures with the Financial Services Commission to open a temporary financial committee at 9 o'clock after the additional F4 meeting on the morning of the 4th. This schedule was announced to the press at 1:25 a.m. After the National Assembly passed the resolution to lift the ceiling at 1 a.m., they judged that just the announcement of the ceiling could have a significant impact on the market.

After the temporary financial committee was decided, they began to concretize the financial committee's stability and response measures, focusing on related officials. Choi Yong-hwan, Governor of the Financial Supervisory Service, and Choi Chang-ho, Governor of the Monetary Policy, as well as Yoon Kyung-soo, Governor of the International Affairs, and Lee Byung-mok, Governor of the Financial Settlement, were mostly absent. The Governor also spent a busy night until 2 a.m. discussing communication plans with Kim Yong-sik, Public Relations Officer.

The temporary financial committee held on the morning of the 4th decided to purchase unlimited repurchase agreements (RP) until February next year to provide liquidity to the market. RP purchases are a method of providing liquidity by the Bank of Korea buying securities with conditions for repurchase from financial institutions. Government bonds, government-guaranteed bonds, and other eligible securities designated by the financial committee are subject to purchase.

Han Eun expanded the purchase targets to include industrial bank bonds, small and medium-sized enterprise bank bonds, export-import bank bonds, nine special bonds issued by public institutions, agricultural bank bonds, fisheries bank bonds, and financial bonds under the 'Banking Act'. RP purchase targets were also expanded to all banks, securities companies, and futures companies. Foreign currency RPs were also decided to be purchased if necessary to provide foreign currency liquidity.

After the financial committee, a press conference was held with Park Jong-woo, Deputy Governor, and Choi Yong-hwan, Choi Chang-ho, Yoon Kyung-soo, and Lee Byung-mok, Governors. Park Deputy Governor emphasized, "We will purchase RPs sufficiently," and "We will provide liquidity as much as needed without limit."

Choi Yong-hwan, Governor, also emphasized, "The RP purchase period will be sufficiently extended to a few weeks."

Although the measures were similar to those taken during the COVID-19 period or the Lehman Brothers incident, the situation was considered less severe than at that time. "Currently, we are operating with the completion of monetary policy while considering interest rates, and the market is relatively more stable than at that time," Park Deputy Governor explained. Choi Yong-hwan, Governor, also stated, "There were no special requests for funds yesterday and today."

5-Person Financial Committee for the First Time in 12 Years

The temporary financial committee was held for the first time in 3 years and 5 months since June 2021. At that time, the committee discussed changes in the conditions for corporate bond purchases and the extension of maturity to respond to COVID-19. Since 2015, the temporary financial committee has been held eight times.

This financial committee was attended by a total of 5 members, including the Governor and 4 members of the financial committee. Yoo Sang-dae, Deputy Governor, attended the Financial Stability Board (FSB) meeting held in Hong Kong, and Jang Yong-sung, a member, was visiting Newswise University in the United States.

According to the Banking Act, the financial committee meeting can be convened with the attendance of at least 5 members. It was a situation where it was difficult to hold a meeting even with just one more absence. The last time Han Eun held a financial committee meeting with the minimum number of 5 members was in November 2012, 12 years ago.

The measures taken by Han Eun at the end of the emergency night are generally evaluated as contributing to market stability. On this day, the won-dollar exchange rate started at 1,418 won, 15 won and 20 jeon higher than the previous day's weekly closing price (3:30 p.m.), and then fluctuated around 1,415 won before falling to 1,410 won and 10 jeon.

Compared to the previous week's market situation, it rose by 7 won and 20 jeon, but fell by 32 won compared to the high price of 1,442 won that appeared during the night. The stock and bond markets also showed relatively stable movements.

Han Eun plans to continue monitoring the market situation through the emergency response TF led by the Deputy Governor twice a day at 10 a.m. and 4 p.m. from this day.

Jin-kyu Kang, Reporter josep@hankyung.com