▲ The South Korean national flag and the government emblem are displayed at the Government Complex-Sejong.
Regulations are being overhauled to transform the South Korean won into a currency that can be freely traded overseas.
The Ministry of Economy and Finance announced today (October 13) that it is putting forward an administrative notice for an amendment to the Foreign Exchange Transactions Regulations, which contains specifics on easing foreign exchange regulations.
According to the amendment, prior reporting requirements for foreign exchange banks' borrowing transactions and residents' and non-residents' issuance of won-denominated securities will be converted to ex-post reporting.
Considering the soundness management systems already applied to banks, the prior reporting requirement for long-term borrowing exceeding 50 million dollars will be eased to ex-post reporting (within two business days) for amounts exceeding 100 million dollars.
Banks will be allowed to report borrowing won funds from non-residents ex-post if the amount exceeds 50 billion won.
For those wishing to issue won-denominated securities, the system that previously required prior reporting regardless of the amount will be changed to allow ex-post reporting for issuances of 50 billion won or less.
The standard reporting thresholds for capital transactions related to won fund lending and borrowing will also be significantly raised.
The reporting threshold for a resident borrowing won from a non-resident will be raised from 1 billion won to 50 billion won annually, while the threshold for a bank's won-denominated loans to non-residents will be raised from 30 billion won to 50 billion won.
The cash pooling management system will also be improved.
The cash pooling system, which allows multinational corporations to lend and borrow surplus and deficit funds within the scope of prior reports, will now be made available for the won as well.
The maximum limit will be raised from 50 million dollars to 100 million dollars, including won.
Convenience for foreign securities firms and investors using the domestic securities market will also be enhanced.
Previously, domestic branches of foreign securities firms were restricted from borrowing foreign currency and won funds from non-residents, but the system is being improved to allow this at the same level as domestic corporations.
Through this, securities settlement funds, such as settlement facilitation payments, are expected to be smoothly procured.
The investment-dedicated account system will also be supplemented so that foreign investors can invest the won they hold for domestic securities investments and other purposes into short-term financial products.
The Ministry of Economy and Finance stated that it held a meeting earlier today with financial institutions, including the Bank of Korea, commercial banks, and securities firms, regarding the easing of foreign exchange regulations to gather opinions.
Financial institutions reportedly empathized with the intent of the amendment and welcomed the regulatory easing measures.
The amendment will be finalized after gathering public feedback during the administrative notice period running through October 26, and is scheduled to take effect within the year.
The Ministry of Economy and Finance stated, "The relaxation of capital transaction regulations in the Foreign Exchange Transactions Regulations is expected to enhance the usability of won funds, alleviate the burden of foreign exchange risk, and improve convenience in foreign exchange transactions," adding, "We will also strive for risk management in cooperation with related agencies, such as closely monitoring potential impacts on the market during the foreign exchange advancement process."
(Photo: Yonhap News)
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