external debt management in korea
TRANSCRIPT
External Debt External Debt Management in KoreaManagement in Korea
Junggun OhJunggun Oh
[email protected]@bok.or.kr
ContentsContents
Lesson from the CrisisLesson from the Crisis External Debt Management OrganizationExternal Debt Management Organization FX Transaction Information NetworkFX Transaction Information Network Disclosure of ED StatisticsDisclosure of ED Statistics Early Warning SystemEarly Warning System Management of Financial Institutions’ Management of Financial Institutions’
FX SoundnessFX Soundness Analysis and CountermeasuresAnalysis and Countermeasures
Lesson from the CrisisLesson from the Crisis
In spite of sound long-term solvency, short-In spite of sound long-term solvency, short-term illiquidity may cause crisisterm illiquidity may cause crisis
• Short-term external debt (ED) management is Short-term external debt (ED) management is important in Koreaimportant in Korea
Long-term ED management indicator: Total ED / GDPLong-term ED management indicator: Total ED / GDP
Short-term ED management indicator: Short-term ED / Short-term ED management indicator: Short-term ED / Long-term ED, Short-term ED / Reserves Long-term ED, Short-term ED / Reserves
External Debt in KoreaExternal Debt in Korea
0
50
100
150
200
250
300
350
1995 1 1996 1 1997 1 1998 1 1999 1 2000 1 2001 1 2002 1 2003 1
0
10
20
30
40
50
60
SED/Reserve((le
Total Debt/GDP(right
SED/Total Debt(right
External Debt Management External Debt Management OrganizationOrganization
BOK MOFE FSS
Information Network
Statistics
Analysis and Countermeasure
Overall Planning and
Management
Supervision on FX Soundness
KCIF
EWS
BOK: Bank of Korea, MOFE: Ministry of Finance and Economy, FSS: Financial Supervision Service, KCIF: Korea Center for International Finance
FX Transaction Information FX Transaction Information NetworkNetwork
Introduced in 1999Introduced in 1999
Linked with about 2300 almost all Linked with about 2300 almost all financial institutionsfinancial institutions
Monitoring every FX transactions by Monitoring every FX transactions by transaction, by institution, by persontransaction, by institution, by person
Providing information to BOK, MOFE, Providing information to BOK, MOFE, FSS, KCIF, KDIC, FIU etc.FSS, KCIF, KDIC, FIU etc.
Disclosure of ED StatisticsDisclosure of ED Statistics
Periodic disclosure of ED statistics for Periodic disclosure of ED statistics for enhancing their transparencyenhancing their transparency
• Disclosure of ED statistics every quarterDisclosure of ED statistics every quarter By institution, by long & short-termBy institution, by long & short-term
• Disclosure of FX reserves twice a monthDisclosure of FX reserves twice a month
Early Warning SystemEarly Warning System
Every month since April 1999Every month since April 1999
Two methodsTwo methods
• Probit modelProbit model
• Signaling approachSignaling approach
Management of Financial Management of Financial Institutions’ FX Soundness Institutions’ FX Soundness
FX liquidity ratioFX liquidity ratio
FX asset liability maturity mismatch ratioFX asset liability maturity mismatch ratio
Medium & long-term FX fund raising Medium & long-term FX fund raising ratioratio
Exchange rate risk managementExchange rate risk management
FX Liquidity RatioFX Liquidity Ratio
Introduced in July 1997Introduced in July 1997
FX assets due in 3 months/FX liabilities FX assets due in 3 months/FX liabilities due in 3 monthsdue in 3 months
Guideline: 80% or more (85% or more Guideline: 80% or more (85% or more since April 1, 2004)since April 1, 2004)
109.799.897.5106.8
March 2004200320022001
Note: the end of period
FX Asset Liability Maturity FX Asset Liability Maturity Mismatch RatioMismatch Ratio
Introduced in January 1999Introduced in January 1999 (FX assets by period-FX liabilities by (FX assets by period-FX liabilities by
period)/Total FX assetsperiod)/Total FX assets Guideline: within 7 days: 0% or more, Guideline: within 7 days: 0% or more,
within 1 month: -10% or morewithin 1 month: -10% or more
within 1 month
within 7 days
2.61.30.45.1
2.65.03.25.9
March 2004
200320022001
Note: the end of period
Medium & Long-term Medium & Long-term FX Fund Raising RatioFX Fund Raising Ratio
Introduced in January 1999Introduced in January 1999
Outstanding of raised FX funds of maturity of 1 year Outstanding of raised FX funds of maturity of 1 year or more / Outstanding of FX loans of maturity of 1 or more / Outstanding of FX loans of maturity of 1 year or more year or more
Guideline: 50% or more (80% or more since April 1, Guideline: 50% or more (80% or more since April 1, 2004)2004)
136.2126.5117.7119.6
March 2004200320022001
Note: the end of period
Exchange Rate Risk ManagementExchange Rate Risk Management
FX position managementFX position management
Corporations’ exchange rate risk Corporations’ exchange rate risk management schememanagement scheme
FX Position ManagementFX Position Management
Overall position must be less than 20% of the Overall position must be less than 20% of the amount of capital at the end of a previous amount of capital at the end of a previous monthmonth
• Overall position = spot position + forward positionOverall position = spot position + forward position
Overall positions of all foreign exchange Overall positions of all foreign exchange banks must be reported to BOK everyday banks must be reported to BOK everyday through FX Transaction Information Networkthrough FX Transaction Information Network
Corporations’ Exchange Rate Corporations’ Exchange Rate Risk Management SchemeRisk Management Scheme
Introduced in April 2001Introduced in April 2001
Bank: assess corporations’ exchange rate risk Bank: assess corporations’ exchange rate risk management situations in loan screeningmanagement situations in loan screening
FSS: assess banks’ management based on FSS: assess banks’ management based on CAMELS including banks’ assessment on CAMELS including banks’ assessment on corporations’ exchange rate risk management corporations’ exchange rate risk management
FSS BanksCorporations
Exchange RateRisk
Management
CAMELSLoan
Screening
Analysis and CountermeasureAnalysis and Countermeasure
Compilation of statistics and forecasting Compilation of statistics and forecasting on monthly FX supply and demandon monthly FX supply and demand
Monitoring short-term ED and Monitoring short-term ED and introducing appropriate countermeasuresintroducing appropriate countermeasures
• Changes in FX liquidity ratio, Medium & Changes in FX liquidity ratio, Medium & long-term FX fund raising ratio etc.long-term FX fund raising ratio etc.