New Guidelines to Boost Foreign Participation in Korea’s FX Market


In a significant move to boost foreign participation in Korea’s foreign exchange (FX) market, the Ministry of the Economy and Finance has announced new guidelines for the Foreign Exchange Affairs of Registered Foreign Institutions (RFIs). The announcement, made on September 26, 2023, comes as part of the government’s “Improvement Measures for Foreign Exchange Market Structure” and follows the amendment to the Enforcement Decree of the Foreign Exchange Transactions Act on September 25.

The new guidelines, which will supersede the existing Regulations on Foreign Exchange Transactions, outline the registration requirements for RFIs wishing to participate in the domestic FX market. The government will verify the eligibility of foreign financial institutions (FIs) at the time of registration and conduct a review every three years to ensure stable transactions with Korean FIs and mitigate any potential risks to Korea’s FX market.

Under these guidelines, RFIs will be permitted to buy and sell deliverable spots and forwards (including FX swaps and outright forwards) in the onshore interbank FX market. However, these transactions must be conducted through government-approved local brokers, including foreign brokers’ branches in Korea. RFIs will also be able to trade deliverable FX spots and forwards with their customers, who must be non-residents. Payments for these transactions must be made through foreign currency accounts for business use or won accounts opened with domestic banks or foreign bank branches in Korea.

As participants in the FX market, RFIs are required to confirm that their customers have reported their FX transactions legitimately and to report key transaction-related information to authorities. Recognizing the challenges faced by overseas institutions in fulfilling certain obligations, the guidelines allow RFIs to designate FIs such as FX banks in the same group or leading banks as agencies to fulfill these obligations.

The government has pledged to supervise these institutions closely to maintain their soundness and monitor compliance with obligations through the Bank of Korea. This move is expected to significantly enhance foreign participation in Korea’s FX market and contribute to its overall growth and stability.

Reference: Ministry of Economy & Finance, Republic of Korea (Source)


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