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| A seminar hosted by the government on overhauling the currency market and presenting policy directions takes place at Korea Federation of Banks in central Seoul, Tuesday. Yonhap |
Gov't plans to liberalize foreign exchange market from 2nd half of 2024
By Yi Whan-woo
Korea plans to allow offshore financial companies to directly trade Korean won and foreign currencies here in a bid to attract international investments and expand the foreign exchange market, financial authorities announced on Tuesday.
To cover the trading hours of the U.S. and European markets, Korea, Asia's fourth-largest economy, also plans to run foreign exchange trading hours almost around the clock.
Jointly announced by the Ministry of Economy and Finance, the Bank of Korea (BOK) and the Financial Supervisory Service (FSS), the envisioned measures will be implemented as early as the second half of 2024 after a six-month pilot run.
The planned overhaul would mark a significant turnaround in the domestic currency market after Korea began tightly managing foreign exchange trading since the 1997-1998 Asian financial crisis when the won devalued sharply against the greenback and the country's U.S. dollar reserves were nearly depleted.
"The overhaul of the foreign exchange market is a matter of broadening the financial market and industry as well as the nation's entire economy," Kim Seong-wook, a senior finance ministry official, said during a seminar to discuss the current policy direction after the joint government announcement was made earlier in the day.
"Traumatized by the currency crisis in the past, however, the country had to prioritize stability of the foreign exchange market and stick to closed and restrictive policies for decades," Kim said, adding that the growth of Korea's foreign exchange market remained sluggish due to its closed nature over the decades, while its trade volume and the securities markets have posted sharp growth.
"And the time certainly has arrived for change (in the currency market)," Kim added.
Currently, only Korean banks and securities firms that are approved by the government can sell and buy currencies for retail customers.
Under the overhaul plan, trading will be open to offshore companies as long as they win approval and get certified as so-called registered foreign institutions.
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| In this file photo taken on Oct. 21, 2022, an official at Hana Bank checks bundles of U.S. dollars, Chinese yuan, and Japanese yen at its office in Seoul. Yonhap |
Speaking on condition of anonymity, a government official explained the plan would save money for offshore companies that would otherwise have to pay government-approved brokers.
The government believes that the currency market reform plan will help beef up the Korean won's status in the global market over the longer term and ease the country's dependence on foreign currencies.
Meanwhile, the overhaul plan is in line with the government's efforts to win developed market status from Morgan Stanley Capital International (MSCI).
Korea is grouped as an emerging market by MSCI, which cites the absence of an offshore currency market for the Korean won as a reason.
