South Korea Bank of Korea Reverse Repurchase Agreement Sales

The outstanding balance of reverse repurchase agreement sales (RP sales) is the amount by which the Bank of Korea absorbs short-term liquidity from the interbank market by temporarily selling securities to counterparty banks under an agreement to repurchase them at a specified future date. Typical maturities range from 7 to 91 days, and RP sales are the BOK's primary tool for short-term open market operations, fine-tuning reserve supply on a week-to-week basis to keep the overnight call rate near the policy target.

Within the Net Liquidity formula, RP sales are subtracted from total assets because they represent cash temporarily removed from bank reserve accounts and parked at the central bank. The distinction between RP sales, which absorb liquidity on the liability side, and RP purchases, which provide liquidity on the asset side, is critical for balance-sheet accounting, and because RP purchases are already embedded in KRBOKASSET they require no separate treatment in the Net Liquidity computation.

An increase in the outstanding balance indicates that the BOK is absorbing more reserves, while a decrease indicates that the scale of absorption is contracting.

The value is the monthly end-of-period balance taken from the repurchase agreement sale item of the Bank of Korea's Key Accounts statistical release. The raw series is reported in billions of KRW and is converted to trillions of KRW by dividing by 1,000.

Repurchase agreements are the operational workhorse of modern central banking, serving as the primary instrument through which central banks adjust the supply of reserves to implement their interest rate targets. The choice between repo-based operations and outright operations reflects a tradeoff between temporary and permanent reserve adjustment, with repos offering the flexibility to fine-tune reserve supply without permanently altering the central bank's securities portfolio (Bindseil 2004). The BOK's reliance on RP sales for short-term liquidity absorption follows this logic, as the temporary nature of the operations allows reserve supply to adjust automatically as repos mature.

Central bank operating procedures have shifted from direct instruments such as reserve requirements and interest rate controls toward market-based instruments such as repos and outright operations, a transition documented across OECD countries (Borio 1997). This evolution places the BOK's RP operations within the broader change in monetary policy frameworks. Furthermore, the balance of the operating mix among repos, outright operations, and standing facilities reveals the central bank's assessment of liquidity conditions that the policy rate alone does not capture (Friedman and Kuttner 2011).

Repo operations are the primary mechanism for keeping the overnight rate within the bounds of the interest rate corridor (Whitesell 2006). In Korea's operational framework, RP sales absorb excess reserves that would otherwise push the call rate below the policy target, while RP purchases, which appear on the asset side in KRBOKASSET, inject reserves when a deficiency would push the call rate above target. The outstanding balance of RP sales therefore provides a real-time indicator of the direction and magnitude of the BOK's fine-tuning operations.

The terms and volume of repo operations interact with banks' voluntary reserve holdings and affect their optimal reserve management strategies (Bech and Keister 2017). Changes in the outstanding RP sales balance signal shifts in the BOK's assessment of reserve conditions and provide advance information about potential adjustments to the operational stance, even when the policy rate itself remains unchanged.

For money-market practitioners, the outstanding balance of BOK RP sales provides direct information about the central bank's liquidity management operations and their impact on short-term funding conditions. The supply of collateral available for repo transactions governs equilibrium repo rates and market liquidity under the search frictions of over-the-counter markets (Duffie, Gârleanu, and Pedersen 2005). When the BOK conducts RP sales, it temporarily removes securities from the market and absorbs cash, altering both the collateral supply and the reserve position of counterparty banks.

The aggregate volume of repo transactions carries information about leverage and funding conditions in the broader financial system, so the size and composition of the repo market matter for financial stability (Krishnamurthy, Nagel, and Orlov 2014). Monitoring BOK RP sales alongside private repo market volumes enables market participants to assess whether changes in aggregate repo activity reflect central bank operations or shifts in private-sector funding demand.

In the tri-party repo market, the distribution of repo transactions across counterparties and collateral types matters for systemic risk assessment (Copeland, Martin, and Walker 2014). In the Korean context, the counterparties to BOK RP sales are primarily commercial banks and securities companies, and the outstanding volume indicates the degree to which the BOK is absorbing liquidity from these institutions.

Runs on repo, driven by concerns about collateral quality, can amplify funding stress, as was prominent in the 2007–2008 financial crisis (Gorton and Metrick 2012). Central bank repo operations serve as a backstop that can stabilize private repo and securities lending markets during stress episodes (Adrian et al. 2013). For Korean financial institutions, the BOK's RP operations serve both as a routine liquidity management tool during normal times and as a potential emergency liquidity facility during crises, making the outstanding RP sales balance informative across market regimes.

Over 435 observations from 1990-01-31 to 2026-03-31, the Bank of Korea repo sales gives an ambiguous reading on the level, since the Dickey and Fuller (1979) and Phillips and Perron (1988) tests reject a unit root at p = 0.2587 and p = 0.0 while the Kwiatkowski et al. (1992) test also rejects stationarity, so no clean order is assigned. On the first difference the Ljung and Box (1978) portmanteau rejects white noise at lags 12 and 24, Q = 141.71 and Q = 160.54 at p = 0.000 and p = 0.000. The Bai and Perron (1998, 2003) procedure finds no break in the mean, a reading consistent with the parameter-instability inference of Andrews (1993) on the differenced object (Perron 1989).

This series is an unadjusted monthly aggregate, so the seasonal battery is appropriate and is run, with the HEGY seasonal-unit-root test of Hylleberg et al. (1990), the QS seasonal portmanteau, and the seasonal-dummy F cross-read with Canova and Hansen (1995) finding deterministic seasonality rather than seasonal unit roots (Beaulieu and Miron 1992; Ghysels and Osborn 2001).