Republic of Korea: Restrictions on overseas bank financing by commercial operations.
Description
In June 2010 the Ministry of Strategy and Finance issued a policy statement concerning volatile capital flows. The statement makes clear "the Korean government will reinforce macro-prudential measures to reduce capital flows within the current framework of the open and liberalized economy.
One of the specific measures proposed is to "tighten" the use of bank loans in foreign currency. The statement says "Foreign currency financing should be operated for overseas use only. However, the exception will be applied only to small and medium-sized manufacturers: Small and medium-sized manufacturers will be exceptionally allowed to operate it fo the purpose of purchasing domestic facilities, to the extent that total foreign currency bank loans of small and medium-sized manufacturers stay at the current level. And the reinforced regulations will be applied only to new bank loans in order to allieviate the impact on the (sic) business activities."
The above statement could be read as denying commercial opportunities in the Korean markets to banks located abroad. The statement does not demonstrate that the proposed measure is the least discriminatory measure necessary to attain the financial stabilization objective.
Any Evidence-Based Deliberation:
| Question | Result |
|---|---|
| Is there anything in the public record to suggest that evidence of the effectiveness of the proposed measure was considered during official deliberations? | |
| Is there any evidence that alternatives to the proposed measure were considered? | |
| Is there anything in the public record that suggests that empirical evidence informed the comparison across the alternatives available to government? | |
| Was such evidence identified? | |
| Is such evidence publicly available? | |
| Did the official decision-maker in question provide an explanation as to why a chosen measure was favoured over alternatives? | |
| Is there any evidence to suggest that potentially affected trading partners were consulted before the measures were taken? | |
| Is there any evidence that safeguards have been put in place to ensure that implementation of the initiative is transparent and non-discriminatory? | |
| Did the government state its intention to review the measure within one year of implementation? |
Date Discovered:
Implemented: No
Date of inception:
GTA Evaluation: Amber
Source:
"New Macro-Prudential Measures to Mitigate Volatility of Capital Flows," Ministry of Strategy and Finance. June 2010.
Government Response:
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