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 also plans to relax the futures foreign exchange position ratio cap for foreign bank branches operating in Korea from 75% to 200%, aiming to facilitate additional foreign currency inflows.
The government will further ease restrictions on foreign currency loans for residents, allowing export companies to obtain loans for both domestic facility and working capital purposes. In addition, it will promote the use of integrated foreign investor accounts to enable overseas investors to trade Korean stocks directly through local securities firms without opening separate accounts.
The government also clarified that foreign companies listed on overseas stock exchanges will be recognized as qualified investors, eliminating procedural inconveniences in foreign exchange derivative transactions. All related follow-up measures are expected to be completed by the end of the year to stabilize the foreign exchange market and reduce hedging costs.