BOK involved in US$7b swap<\/p>\n
Associted Press, Seoul, South Korea<\/p>\n
The Bank of Korea on Friday signed local-currency swap
\nagreements worth the equivalent of US$3 billion with the Bank of
\nJapan and $4 billion with the People's Bank of China as part of a
\nplanned expansion of ties among Asian central banks.<\/p>\n
The agreements fall under the Chiang Mai Initiative, which
\nallows Asian central banks to borrow money from each other to
\ncover short-term requirements during financial market shocks that
\ncould lead to a balance-of-payments crisis.<\/p>\n
"This is indeed a memorable day for our three central banks as
\nwe open a new chapter of central bank cooperation with the
\nstrengthened trilateral currency swap network," Bank of Japan
\nGovernor Toshihiko Fukui said at a signing ceremony for the new
\nagreements, according to text of his remarks distributed by the
\nbank in Tokyo.<\/p>\n
Larger swap agreements among the three banks are expected in
\nfuture years, a Bank of Korea official said.<\/p>\n
The signing ceremony comes after finance ministers from South
\nKorea, Japan and China agreed at a meeting of Asian nations in
\nIstanbul earlier this month to expand existing currency swap
\nagreements, the South Korean central bank said in a statement.<\/p>\n
The meeting involved the 10-member Association of Southeast
\nAsian Nations plus China, Japan and South Korea.<\/p>\n
Under the agreement between the Bank of Korea and the Bank of
\nJapan, the two central banks may draw from the other's won or yen
\nfunds when there is a short-term liquidity crunch under normal
\ncircumstances to achieve financial stability.<\/p>\n
The two already have a dollar-denominated currency swap
\nagreement in place. That agreement was first signed in 1999 and
\nwas increased in size to $7 billion from $5 billion in 2001.<\/p>\n
The Bank of Korea said the new $3 billion swap agreement has a
\nslightly different purpose than previous swap contracts that were
\nmostly aimed at preventing a balance-of-payments crisis.<\/p>\n
"We expect to use these funds as a means to stabilize the
\ncurrency market once the won\/yen (foreign exchange) market
\ndevelops," the bank statement said without elaborating.<\/p>\n
Fukui said he hopes the local-currency agreements "will
\nencourage greater flows of local-currency-denominated capital in
\nthe Asian region."<\/p>\n
The agreement between the Babk of Korea and the People's Bank
\nof China, which will replace a previous agreement worth $2
\nbillion that matures June 24, allows the two banks to borrow
\neither in yuan\/won or in dollars from each other when they are
\nshort of foreign exchange.<\/p>\n
The two banks already have a currency swap agreement worth the
\nequivalent of $3 billion in which the two central banks can
\nexchange yuan and yen. No changes or additions were made to that
\nagreement on Friday.<\/p>",
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