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보고서
2022 Jul/25
Korea’s Short-Term Financing Securities Market: its Characteristics and Implications Issue Papers 22-12 PDF
Summary
Short-term financing securities (commercial paper and short-term bonds) are issued with maturities of less than one year to meet the demand for short-term capital. Although such securities can serve as a flexible and effective financing tool, they are susceptible to market volatility. Furthermore, if the short-term financing securities market becomes tighter, it would influence the entire financial market.    

In Korea, the outstanding balance of short-term financing securities has shown a continuous growth trend to amount to KRW 313.8 trillion as of end-May of 2022. Amid a shift in regulations and market environment, the short-term financing securities market has also seen its structure changing. Accordingly, floating securities and instruments with top credit ratings have gradually made up a larger portion of the market. On the other hand, short-term bonds (STBs) have been adopted to address regulatory issues of commercial paper (CP) but they take up a small proportion due to a disparity in the regulatory scheme.

In the short-term financing securities market, one of the most prominent features is a recent surge in the weight of long-term CP. This demonstrates that short-term financing securities are replacing long-term financing instruments while acting as an effective short-term financing tool. It is notable that an excessive increase in the weight of long-term financing instruments would give rise to distortion of credit ratings, a less sophisticated trading price structure and difficulties in redemption during a rate hike cycle, thereby leading to low liquidity of financing instruments. On top of that, if volatility intensifies in the financial market, the spread of short-term financing securities would widen further, which may aggravate the interest payment burden borne by issuers of long-term CP.

This necessitates regulatory measures to ensure that the short-term financing securities market serves its intended purpose. To this end, the regulatory gap between CP and STBs should be narrowed in the short run. In credit evaluation, the limit and duration of STBs should be equally applied to CP and credit ratings should be given based on such conditions. Additionally, varied information including the issue price and returns should be provided to investors to ensure that various aspects of short-term financing securities are reflected in the pricing process. As a long-term approach, it is worth considering replacing CP with STBs.