South Korea rolls back COVID easing of financial regulations
SEOUL, March 31 (Reuters) – South Korea will gradually roll back one of three temporary lending rule easings aimed at boosting liquidity during the COVID-19 pandemic, while simply letting two others lapse, the financial regulator announced on Thursday.
The measures are the Liquidity Coverage Ratio (LCR), which will slowly return to its former level, the LCR in foreign currencies and the application of Loan to Deposit Ratios (LTD).
All were eased in April 2020 to help provide liquidity to businesses and financial institutions as the pandemic worsened.
The temporary lowering of the total LCR to 85%, from 100% previously, was due to expire at the end of March.
The ratio would remain at 85% until July, however, the Financial Services Commission said on Thursday, before rising to 90% in September, with further quarterly increases of 2.5 percentage points each quarter until ‘he comes back to 100%.
The temporary lowering of the foreign exchange LCR to 70% was due to expire at the end of June, and the ratio will immediately return to the previous level of 80%, he added.
Banks used to be punished for exceeding LTD ratios. But there have been no penalties since April 2020 if they stray 5 percentage points above their ratios. This concession will expire on June 30.
“The Financial Services Commission plans to closely monitor relevant trends to ensure transparent management of financial soundness,” the regulator said in a statement, as authorities moved to standardize temporary measures.
(Reporting by Joori Roh; Editing by Bradley Perrett)
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