Money supply falls for 1st time in 23 months in March: BOK

Seoul, May 15 (IANS) South Korea's money supply fell for the first time in 23 months in March, due mainly to a decline in savings deposits and other liquid financial products, central bank data showed on Thursday.

The country's M2, a key gauge of the money supply, stood at 4,227.8 trillion won (US$3.01 trillion) in March, down 0.1 percent from a month earlier, according to the preliminary data from the Bank of Korea (BOK), reports Yonhap news agency.

It marked the first monthly decline since April 2023. On a year-on-year basis, however, the money supply advanced 6.1 percent in March.

The M2 is a measure of the money supply that counts cash, demand deposits and other easily convertible financial instruments.

The on-month decline came as savings deposits fell 7.2 trillion won from the previous month and other liquid financial products dropped 5.7 trillion won. Financial bonds with maturities under two years also lost 4.8 trillion won.

But investment funds went up by 8.6 trillion won on-month and demand deposits increased 5.5 trillion won.

"Savings deposits declined due to fiscal spending by local governments, while other liquid financial products, particularly foreign currency deposits, went down as a result of overseas investments and import payment settlements," a BOK official said.

South Korea's liquidity aggregate, the broadest measure of money supply, edged up 0.3 percent from a month earlier to stand at 7,236 trillion won in March, the data showed.

Meanwhile, the country's financial watchdog said on Thursday that it will prod financial firms to manage their incentive systems in a proper and reasonable manner.

The Financial Supervisory Service (FSS) said incentive systems can carry risks if not properly managed, which also can hurt financial institutions' soundness as well as the financial stability in the broader sector.

Some financial firms have been under fire for offering hefty incentives to employees and C-suite executives despite soured real estate development projects.

Also, some financial firms have been lax in managing incentive systems in accordance with regulatory guidelines, the watchdog said.

Data from the FSS showed that banks, securities firms and other financial institutions doled out some 1.06 trillion won (US$758 million) worth of incentives such as performance-based pays, profit-sharing and commissions to employees and executives in 2023, down 8.8 percent from 1.16 trillion won the previous year.

Investment companies offered the largest 660 billion won worth of incentives to their employees and executives in 2023, down 9.5 percent from a year earlier, trailed by banks with 159 billion won, up 8.3 percent, and insurance firms with 143 billion won, down 18 percent.

—IANS

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