BOK, Finance Ministry move to lift ailing wonThe Bank of Korea (BOK) and the Ministry of Strategy and Finance have stepped in to curb the days-long “excessive depreciation” in the Korean won.
The two authorities issued a statement - which can be considered indirect market interference - after the Korean won slumped to 1,239.6 won per U.S. dollar in the middle of the trading day on Friday.
“Korea’s central bank and government are worried that the exchange rate between the won and U.S. dollar has fluctuated too much recently,” Hong Seung-je, head of the international department at the BOK, and Hwang Kun-il, head of the international finance policy division at the Finance Ministry, said in a joint statement. “The monetary authority will come up with measures to counter the excessive depreciation.”
This week, the Korean currency weakened against the greenback to the lowest in almost six years, after the European Central Bank signaled the possibility of a further economic recession and the oil-producing countries failed to agree on a drilling reduction.
The won again fell on Friday morning after the Korean government called for the passing of a counterterrorism bill in the National Assembly due to rising concerns of Pyongyang’s terror threats.
The depreciation slowed after the statement, and the exchange rate of the won was 1,234.4 won per dollar, up 0.57 percent compared to the previous trading day.
BOK Gov. Lee Ju-yeol also warned heads of local commercial banks to prepare for a tough year ahead by working proactively on risk management. Lee said the banks and their borrower companies are expected to have difficult time enhancing profitability this year due to continuing external uncertainties and internal risks.
“The financial and macroeconomic circumstances today in and outside the country are far from welcoming … due to issues like Japan’s minus base rate policy, the unstable Chinese economy and the North Korea risk,” Lee said at a meeting on Friday with the heads of seven policy and commercial banks.
“As the uncertainties are running high, the risk management in bank management has become more crucial than ever,” Lee said.
Korean commercial banks are healthy in capital adequacy, Lee said, but they should keep working on maintaining their profitability, which he forecast will be as tight as last year’s due to falling interest margins and the stagnant revenues of borrowers.
The bankers were warned to maintain forex liquidity high, as global uncertainties and the North Korea risk may hit anytime in the future.
BY KIM JI-YOON [firstname.lastname@example.org]