Financial Regulatory Forum

S.Korea to restrict FX borrowing, excessive hedging

September 25, 2009

A South Korean bank clerk shows new 5,000-won ($4.93) bank notes at the headquarters of Woori Bank in Seoul January 2, 2006. The Bank of Korea begun to distribute on Monday the new 5,000-won bank notes, the second-highest denomination in the country's currency, which is aimed to prevent counterfeiting and forgery attempts for public use, local media reported. REUTERS/Kim Kyung-Hoon    Sept 25 (Reuters) – South Korea is discussing measures to crack down on excessive foreign-currency borrowing by banks, Chin Dong-soo, chairman of the Financial Services Commission, said.
   The timing of the proposed measures may be flexible, depending on decisions on global standards by the Financial Stability Board, the G20′s regulation coordination arm, he said.
   For a related story, click on [ID:SEO144752]
   Following are the planned steps Chin unveiled at a briefing.
   — Tighten criteria on foreign currency liquidity ratios by differentiating weightings of foreign assets by retrieval probability
   — Make obligatory the holding of safe foreign assets such as foreign currency-denominated bonds with ample liquidity and high credit ratings
   — Set risk management standards on foreign derivatives transactions to crack down on excessive forex hedging and speculative trading
   — Increase the obligatory ratio of foreign borrowing with more than one year maturity to 110 percent of total foreign borrowing in 2009 and 120 percent in 2010, from the current 80 percent
   — Impose a ceiling on foreign asset size and leverage ratios in proportion to capital to restrict foreign asset growth
   — Tighten disclosure rules over currency hedging costs from asset management companies, which had been blamed for banks’ rush to borrow short-term debt
    (Reporting by Kim Yeon-hee in SEOUL; Editing by Jonathan Hopfner)
  ((yeonhee.kim@thomsonreuters.com; +82 2 3704 5646; Reuters Messaging: yeonhee.kim.reuters.com@reuters.net))
  ((If you have a query or comment on this story, send an email to newsfeedback.asia@thomsonreuters.com))
Keywords: KOREA ECONOMY/ 
  
Friday, 25 September 2009 05:33:48RTRS [nSEO112172] {C}ENDS

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