SEOUL, Oct. 23 (Xinhua) -- South Korea's financial regulator outlined Tuesday details on covered bond issuance for banks in a bid to help lenders secure stable sources of funding and restructure household debts by promoting long-term, fixed-rate loans.
According to the Financial Services Commission (FSC), the proposed Covered Bond Act stipulated that eligible issuers should have a Bank for International Settlement (BIS) capital ratio of over 10 percent and equity capital of more than 100 billion won ( 90.69 million U.S. dollars).
The act defined the issuer as commercial banks, Korea Housing Finance Crop. (KHFC) and Korea Finance Corp. (KoFC) as well as other institutions equivalent to the above-mentioned ones.
Eligible assets consisted of three classes such as underlying assets, liquid assets and other assets. Underlying assets include prime mortgage loans with loan-to-value (LTV) ratio of less than 70 percent, loans to governments and public institutions, and government bonds.
Liquid assets include cash and certificate of deposits (CD) issued by banks, while other assets include cash flows from underlying assets, derivative-trading bonds for hedging currency and interest rate risks.