SEOUL, South Korea will allow offshore investors’ overdrafts of Korean currency over the course of their foreign exchange transactions as part of efforts to improve their convenience in stock and bond trading here and promote investment, the finance ministry said Wednesday.
It is part of the government’s planned revision to the Foreign Exchange Transactions Regulations, which will be pushed for within the first quarter, according to the Ministry of Finance and Economy.
Under the plan, the country will allow foreign investors’ overdrafts of Korean currency so as for them to actively seek ways of reducing the cost of currency exchange.
The risk of settlement failure due to time differences and other issues has prevented foreign investors from using financial institutions other than local custodian banks that they mainly trade with.
But they will be able to choose a more “favorable” financial institution, as overdrafts from their custodian banks will be automatically authorized once they notify the banks of
their transactions in progress with other financial institutions, the ministry said.
The government will also ease regulations on foreigners’ use of Korean currency via an international central securities depository, or ICSD.
Currently, the usage of Korean won after being exchanged via ICSDs is strictly restricted, which makes ICSD holders’ securities investment and payment settlement complicated.
But offshore investors will be able to freely transfer their Korean won between their own accounts and ICSD accounts if they can verify the funds belong to them, according to the ministry.
The government also vowed to exempt foreign investors from the rule of having standing agents or opening cash-based accounts for foreign exchange transactions in case they use omnibus accounts through global asset management companies or foreign financial investment firms.
“The Korean government is strengthening communication with offshore investors to clear uncertainties surrounding foreign exchange trading and Korean won-ba
sed transactions,” the ministry said.
“The FX and financial authorities will pursue the revision of the regulation during the first quarter to address the aforementioned issues. We will continue efforts to improve foreign investors’ accessibility to the Korean market,” it added.
Source: Yonhap News Agency