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Bank of Korea reveals details of currency swap

Korea and China agreed to expand the mutual currency swap line an additional US$26 billion.

The Bank of Korea announced on Friday (Dec. 12) that in line with the Chiang Mai Initiative on bilateral currency swaps, the two countries had decided to expand the currency swap from the existing $4 billion to a total of $30 billion.

Currency swap is a lending of foreign currency between countries in times of liquidity crisis through swapping of a specific amount of different currencies.

The latest deal will be valid for three years but can be extended depending on later talks.

The Bank of Korea explained that the latest move is to relieve the short-term dollar liquidity situation between financial systems of the two nations and promote bilateral trade.

Also, later on the same day, the Bank of Korea announced that it has agreed with Japan to extend that bilateral $13 billion currency swap to $30 billion.

The existing currency swap allowed Korea to swap its currency to a value of yen up to $3 billion, and able to receive $10 billion in case of a crisis.

The Bank of Korea explained that $20 billion was added to the existing $10 billion, and there should be no change to the old sum.

“According to the new agreement now, we can withdraw up to $20 billion and be supplied with $10 billion in U.S. dollars only in an emergency,” the bank said. The bank went on to add that the latest measure is aimed to minimize the effect of the current financial crisis on a global scale and secure stability within the regional financial market.

The Bank of Korea already clinched a swap deal with the U.S. Federal Reserve that was worth up to $30 billion on October 30 this year.


By Kim Hee-sung
Korea.net Staff Writer

http://www.korea.net/NewsFocus/Policies/view?articleId=73826

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