IMPLEMENTATION LEVEL

National

AFFECTED FLOW

Inflow

ANNOUNCED AS TEMPORARY

No

NON-TRADE-RELATED RATIONALE

No

ELIGIBLE FIRMS

all

JUMBO

No

TARIFF PEAK

No
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Inception date: No inception date

Local operations

 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.

AFFECTED COUNTRIES

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