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Korea sets up stability system after attacks

Wednesday 24 November 2010 – by Nicola York

South Korea has set up a 24-hour monitoring system to promote stability in the financial sector following North Korea’s artillery attack on Yeonpyeong Island yesterday.

Vice Minister of Strategy and Finance Yim Jong-yong called an emergency economic meeting earlier today to discuss the attack’s impact on domestic and overseas financial markets and policy responses.

The round the clock monitoring system, which has been in operation since Tuesday, aims to react pre-emptively to any changes in the market and is being run by the Ministry of Strategy and Finance, The Bank of Korea and the Financial Services Commission among others.

The Ministry of Strategy and Finance and the Financial Services Commission said that following the attack the futures market and other after-hours markets “rattled, showing growing volatility”.

But both organisations said: “The attack’s impact on financial markets and the real economy may vary with future developments of the incident; however, as long as the situation does not escalate further, the impact is expected to remain temporary as it did when faced with similar geopolitical risks.”

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Credit rating agency Moody’s said that North Korea’s attack would not negatively impact Korea’s sovereign credit rating while Fitch maintained Korea’s sovereign rating as A+ with a “stable outlook”.

The Government said it will set up a hotline between financial and foreign exchange authorities and commercial banks to detect potential risks in banks’ foreign exchange liquidity, if the situation escalates.

It said that if needed, the Government and the Bank of Korea will supply “ample liquidity” in local and foreign currencies to keep the markets stable.

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