SEOUL, July 21 (AJP) - South Korea will pilot a round-the-clock international won payment network in September, seeking to fill a key settlement gap in its newly opened 24-hour foreign exchange market and strengthen its bid for developed-market status from MSCI.
The Bank of Korea said Tuesday it had formally named the planned offshore settlement system the Bank of Korea Won International Wire Network, or BOK-WireInt.
The network will allow foreign investors and financial institutions to complete won payments during their own business hours, regardless of the time difference with Seoul.
KB Kookmin Bank, Woori Bank, Hana Bank and Shinhan Bank will participate in the initial trial, with the central bank and the four lenders currently conducting system tests.
The BOK plans to complete the introduction and revision of related payment-system regulations by August.
BOK-WireInt will run for 24 hours on business days, from 9 a.m. to 9 a.m. the following day, excluding weekends and public holidays.
The system is intended to give overseas investors continuous access not only to won trading but also to the infrastructure needed to settle and manage the funds.
South Korea moved its domestic foreign exchange market to 24-hour trading on July 6 as part of a broader drive to improve overseas access to the won.
The change enabled investors to trade spot won-dollar and foreign exchange swap products during London and New York hours, but the expansion also increased the need for a payment network capable of supporting transactions beyond conventional domestic operating hours.
The new network is designed to provide that missing link, allowing foreign institutions to complete won settlements during their local market hours rather than waiting for systems in Seoul to reopen.
The BOK said the change should improve the convenience of using and managing won funds and widen foreign access to the country’s settlement infrastructure.
The central bank also expects the project to contribute positively to South Korea’s efforts to join MSCI’s developed-market index.
Restrictions surrounding offshore won trading and settlement have long been among the market-access issues facing South Korea, which remains classified as an emerging market by the global index provider.
The September pilot will test whether the new network can support stable 24-hour settlements before participation is expanded more broadly.
The won strengthened 5.0 won to close at 1,473.4 per dollar at 3:30 p.m. Tuesday - supported by the Bank of Korea’s July 16 rate increase and expectations that proceeds from SK Hynix’s U.S. ADR offering will add to dollar supply in the domestic foreign exchange market.
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