The government is moving to transition the pre-reporting requirement for long-term borrowing by foreign exchange banks and the issuance of won-denominated securities under 50 billion won to a post-reporting system. This initiative aims to enhance the international use of the won by allowing multinational corporations to utilize it in integrated fund management and permitting foreign securities firms' domestic branches to borrow overseas.
The Ministry of Finance announced on October 13 that it will issue an administrative notice regarding the proposed amendments to foreign exchange transaction regulations. This follows the roadmap for the internationalization of the won announced on July 19, detailing measures to ease foreign exchange regulations to facilitate the free trading of the won abroad.
Under the proposed amendments, the process for foreign exchange banks to engage in foreign currency long-term borrowing will be simplified. Currently, long-term borrowings exceeding $50 million require pre-reporting to the Ministry of Finance, but this will change to post-reporting for amounts over $100 million within two business days. Other borrowings will be exempt from pre-reporting.
Regulations on banks borrowing won from non-residents will also be relaxed. Presently, borrowings exceeding 1 billion won must be pre-reported to the Ministry of Finance, while those below this threshold only require reporting to the bank. The amendment will require post-reporting only for long-term borrowings exceeding 500 billion won, with other amounts exempt from pre-reporting. This change considers that banks are already subject to various soundness management systems, including foreign currency liquidity coverage ratios (LCR) and foreign exchange soundness charges.
The procedures for issuing won-denominated securities by residents and non-residents will also be revised. Currently, pre-reporting to the Ministry of Finance is required regardless of the issuance amount, but the amendment will allow for post-reporting for issuances under 50 billion won.
The reporting threshold for borrowing and lending in won will be raised. The requirement for residents to pre-report to the Ministry of Finance when borrowing won from non-residents will increase from over 1 billion won to over 500 billion won.
When banks lend won to non-residents, the pre-reporting threshold to the Bank of Korea will also rise from over 30 billion won to over 50 billion won.
The cash pooling system, which allows multinational corporations to borrow and lend surplus and deficit funds within a pre-reported range, will now include the won. This system, which previously only utilized foreign currency, will now allow for both foreign currency and won, with the maximum limit increased from $50 million to $100 million.
The funding channels for foreign securities firms' domestic branches will be expanded. Borrowing from non-residents in both foreign and won currencies, previously restricted, will now be permitted at the same level as domestic corporations, facilitating smoother procurement of settlement funds.
Additionally, the Ministry of Finance plans to enhance the investment-only account system, allowing foreign investors to manage their won holdings in short-term financial products for domestic securities investments.
The Ministry expressed expectations that these amendments will increase the utilization of won funds and reduce foreign exchange risk burdens, thereby improving the convenience of foreign exchange transactions. It plans to assess the impact of regulatory easing on the market in collaboration with relevant agencies while also managing risks.
Meanwhile, the Ministry held a meeting on the morning of the same day, led by the Director of the International Finance Bureau, with participation from the Bank of Korea and financial institutions such as banks and securities firms to explain the purpose of the amendments and gather feedback. The amendments are expected to be finalized after the administrative notice period ends on October 26 and implemented within the year.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.