Korea to unveil FX market reform measures
Korea will introduce a series of measures this month to ensure that foreign exchange regulations remain in line with global standards, the Ministry of Economy and Finance said on Tuesday.
The announcement comes as Asia’s fourth-largest economy prepares to open its doors to international financial institutions to participate in the domestic foreign exchange market starting in July.
However, Korea’s regulations are perceived to be lacking in meeting international standards, particularly in addressing foreign exchange settlement risks. The term refers to the risk of loss when one party in a foreign exchange transaction pays for the currency it sold but does not receive the currency it bought.
The risk can significantly undermine the financial stability of the affected party. Therefore, adequately addressing this risk is crucial for safeguarding firms.
Those concerns were raised during a meeting between First Vice Finance Minister Kim Byoung-hwan and the representatives of 10 multinational firms operating in London, Monday (local time).
Kim is on a visit to the United Kingdom to promote Korea’s regulatory reforms and to invite more investors from abroad to take a part in Seoul’s foreign exchange market.
The 10 companies included Fidelity Investments, JP Morgan, Morgan Stanley, PIMCO, UBS, and Wellington Management Company.
“The vice minister, after listening to their concerns, said Korea will come up with measures to successfully tackle foreign exchange settlement risks,” the ministry said.
It added that the Bank of Korea, the Financial Services Commission (FSC), and other pertinent entities will also be included in discussions to refine the specifics of foreign exchange market policy reforms.
During Monday’s meeting, the vice minister also promoted an initiative called the “Corporate Value-up Program” led by the FSC to boost undervalued stocks.
Details of the program will be announced within February with the aim of making the Korean securities market more accessible to foreign investors.
On Tuesday, Korea kicked off a test run to extend its foreign exchange trading hours to 2 a.m.
The market is currently open from 9 a.m. to 3:30 p.m.
The government aims to extend the closing hour to 2 a.m. initially, with the ultimate goal of allowing trading 24 hours a day.