South Korea has removed a cap on commercial banks’ bond sales enacted during last year’s credit crunch, in a bid to ensure funding for the financial sector.
The Financial Services Commission told Bloomberg about the decision on Wednesday, when asked about a Korea Economic Daily report. The newspaper said authorities had scuppered the rule, which limited banks to issuing an amount of bonds equivalent to 125% of those maturing each quarter.
With Korea’s credit market seized up due to the default of a property developer, officials last year asked banks to refrain from selling bonds so as not to siphon off even more liquidity.
Lifting the ceiling will help banks raise funds. Lenders have a large number of high-return savings accounts maturing soon. The Korea Economic Daily put the figure at about 100 trillion won ($73.5 billion) from October.
The regulator said it will closely monitor markets to ensure the change to the rules won’t affect the corporate bond market.
