South Korea and Canada have signed a standing bilateral currency swap agreement that will allow both countries to provide liquidity for the counterparty to support domestic financial stability, the Bank of Korea said on Thursday. The agreement, effective immediately, will enable the Bank of Canada to provide Canadian dollars to South Korean financial institutions and for the South Korean central bank to provide Korean won to financial institutions in Canada, the BOK statement said.
It is the first currency swap agreement to be signed between the two countries and it has no limit on liquidity provisions and no expiration date. "It is meaningful we have acquired the strongest ever safety net that can be used in various possible crises," Finance Minister Kim Dong-yeon told a media briefing.
South Korea has accumulated a number of currency swap agreements after the 2008-2009 global financial crisis to bolster its financial buffers against possible external shocks, including the latest extension of its pre-existing swap agreement with China. A finance ministry official told Reuters the Canada deal had been negotiated "for months". Meanwhile, Canada has similar standing swap agreements with six other countries, which include the United States and China.
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