The South Korean government has decided to flexibly adjust foreign exchange soundness regulations to increase foreign currency inflows and resolve structural imbalances in the foreign exchange market. The Ministry of Economy and Finance, Financial Services Commission, Bank of Korea, and Financial Supervisory Service announced this plan on the 18th, citing prolonged structural supply-demand imbalances and recent KRW/USD exchange rate volatility.
The government will temporarily ease supervisory burdens related to advanced foreign currency liquidity stress tests for financial institutions until the end of June next year. It will also relax the futures foreign exchange position ratio cap for foreign bank branches in Korea from 75% to 200%, and further ease restrictions on foreign currency loans for domestic use by residents.
To activate integrated foreign investor accounts, the government has distributed detailed guidelines and completed revisions to financial investment regulations that previously limited account establishment entities. This is expected to increase foreign individual investment in Korean stocks and bring in new capital.
Additionally, foreign companies listed on overseas stock exchanges will now be clearly recognized as qualified investors, eliminating the need for prior verification procedures when trading foreign exchange derivatives. The government expects these measures to improve foreign exchange liquidity and reduce hedging costs, with follow-up actions to be completed by year-end.