South Korea is to set up a $7.2bn (€5.8bn, £4.9bn) fund designed to invest in corporate and bank bonds to ease a liquidity crunch facing companies and lenders in Asia’s fourth largest economy.

The fund will be financed by contributions from financial institutions including pension funds, private banks and insurers, and will be used “at the minimum level to correct temporary market failures”, Jun Kwang-woo, the country’s top financial regulator, said on Thursday.