Enhancing Banks' Forward Exchange Position Limits

In a strategic move to bolster foreign exchange liquidity, the Korean government has announced an expansion of banks' forward exchange position limits by 50%. The current limits, set at 50% for domestic banks and 250% for domestic branches of foreign banks, will be raised to 75% and 375% respectively. This marks the first such adjustment in 4 years and 9 months. A Ministry of Economy and Finance official explained, "This increase will enable banks to access more dollar funding from abroad, thereby enhancing liquidity in the domestic foreign exchange market."

Easing Regulations on Foreign Currency Loans

Simultaneously, regulations on foreign currency loans to exporting companies are being relaxed. Currently, converting foreign currency loans into won for domestic facility investment is prohibited. The government plans to amend the Foreign Exchange Transactions Regulations to permit this conversion for exporting companies anticipating foreign exchange inflows. This change is expected to facilitate smoother operations and enhance the efficiency of financial institutions.

Improving Foreign Currency Funding Conditions

The government is also enhancing foreign currency funding conditions for domestic institutions. Efforts include simplifying bond listing procedures on the Luxembourg Stock Exchange, which hosts over 30% of global bond listings. Additionally, the Financial Supervisory Service will extend the "Foreign Currency Liquidity Stress Test" to June next year to ensure market stability.

Comprehensive Measures for Stability and Growth

These comprehensive measures aim to stabilize the foreign exchange market and improve foreign currency funding conditions. By expanding banks' forward exchange position limits and easing regulations on foreign currency loans, the government seeks to increase dollar liquidity and enhance the overall efficiency of the financial system. These initiatives are expected to contribute to greater stability and growth in the domestic economy.