Finance Minister Choi Sang-mok, Bank of Korea Governor Lee Chang-yong, and officials from financial regulatory agencies issued a joint statement, indicating that they would take all possible measures to stabilize financial and foreign exchange markets, including providing 'unlimited liquidity'.
When the South Korean government stated that it would provide 'unlimited liquidity' to the market when necessary, it meant that the government committed to providing funding support to banks and other financial institutions without limit when financial markets face pressure or crisis. This measure is typically intended to ensure the stability of the financial system and prevent the spread of financial crises.
Specifically, 'unlimited liquidity' means that the central bank or relevant financial institutions are willing to provide any amount of funds to meet the short-term funding needs of the market, typically realized through repurchase agreements (repos), loans, purchases of government bonds, or other financial assets. This can help alleviate credit tightening caused by liquidity shortages, lower market interest rates, encourage borrowing and investment, and ultimately stimulate economic growth.
Such policies are usually adopted in situations of increased economic uncertainty, heightened market volatility, or the emergence of systemic risks. It is a strong signal that the government and the central bank are prepared to take action to maintain financial stability. However, providing unlimited liquidity may also carry some risks, such as potentially leading to rising inflation or weakening the value of the currency, and therefore is used cautiously as a means to respond to severe economic challenges.