ANNOUNCEMENT 13 Jun 2010

In June 2010, the government of Republic of Korea announced a rule change for commercial cross-border financial flows.

NUMBER OF INTERVENTIONS

1

  • 1 harmful
  • 0 neutral
  • 0 liberalising

SOURCE



Financial Supervisory Service, June 2010, 'New Macro-Prudential Measures to Mitigate Volatility of Capital Flows': http://www.fss.or.kr/download.bbs?bbsid=1289277491315&fidx=1288206440668
WTO-UNCTAD-OECD Fourth Report on G20 Trade and Investment Measures, mid-May to mid-October 2010: http://www.oecd.org/daf/inv/investment-policy/46318551.pdf


Inception date: 13 Jun 2010 | Removal date: open ended

Controls on commercial transactions and investment instruments

On 13 June 2010, the Republic of Korea introduced macro-prudential measures to mitigate the volatility of capital flows. The three specific measures are:

  • Introducing new ceilings on banks' foreign exchange derivative positions: 50% of domestic banks' capital, and 250% of foreign bank branches' capital;
  • Reinforcing the regulations on the use of foreign currency bank loans: foreign currency loans granted by financial institutions to residents can henceforth only be used for overseas purposes;
  • Improving foreign exchange soundness of financial institutions: tighter regulations on liquidity ratio and mid- to long-term financing ratio in foreign loan portfolios.

The asymettric treatment of domestic and foreign banks accounts for its classification of red in the GTA database.

AFFECTED SECTORS

 
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AFFECTED PRODUCTS

 
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