Won Borrowing Reporting Threshold Raised from KRW 1 Billion to KRW 50 Billion... Foreign Exchange Rules Significantly Eased

Proposed amendments to Foreign Exchange Transactions Regulations to be announced on October 13

The government will significantly ease foreign exchange regulations to internationalize the won. It will raise the annual threshold for reporting won borrowing by residents from non-residents from KRW 1 billion to KRW 50 billion, and allow multinational companies to pool and manage won funds. It will also lift restrictions on foreign-currency and won borrowing by domestic branches of foreign securities firms to help them secure funds for settling domestic securities trades.

The Ministry of Finance and Economy said on October 13 that it would issue an advance notice of proposed revisions to the Foreign Exchange Transactions Regulations. The revisions follow the "Roadmap for the Internationalization of the Won," announced in July, and spell out measures to ease foreign exchange regulations so the won can become a currency that is freely traded overseas.

Under the proposed revisions, the threshold above which residents must file an advance report when borrowing won from non-residents will rise from more than KRW 1 billion annually to more than KRW 50 billion. Residents are individuals living in Korea or domestic companies, while non-residents are individuals living abroad, foreign companies, and others classified as non-residents under the Foreign Exchange Transactions Act. The reporting threshold for banks lending won to non-residents will also increase from KRW 30 billion to KRW 50 billion. The aim is to reduce administrative burdens arising from won funding and make foreign exchange transactions more convenient for companies and financial institutions.

The Bank of Korea said per capita gross national income stood at $33,745 last year, up 2.6% from the previous year. The photo shows 50,000-won banknotes at Hana Bank's headquarters in Jung-gu, Seoul, on the 5th. Photo by Kang Jinhyeong (aymsdream@)

The procedures for foreign exchange banks to take out long-term foreign-currency loans will also be simplified. Currently, loans exceeding $50 million are subject to advance reporting, but under the revisions, only loans exceeding $100 million will require post-transaction reporting. Reports must be filed within two business days of borrowing. Banks' won-denominated borrowing from non-residents will also be subject to a standard similar to that for foreign-currency borrowing, with post-transaction reporting required for amounts exceeding KRW 50 billion.

Procedures for residents and non-residents to issue won-denominated securities will also be eased. Currently, advance reporting is required regardless of the amount, but the proposed revisions will allow post-transaction reporting for issuances of KRW 50 billion or less. The government will also revise its cash-pooling system to support multinational companies' fund management. Under the system, companies can lend surplus funds to, and borrow funds from, multiple entities within the scope they have reported in advance. Previously, the system could be used only for foreign currencies, but the won will also be eligible. The fund management limit will also increase from $50 million to $100 million, with won funds included.

Borrowing foreign currency and won from non-residents, which has been restricted until now, will be permitted on the same terms as for domestic corporations, helping foreign securities firms secure funds for settling securities trades. The government will also improve the dedicated investment account system so foreign investors can invest won held for domestic securities investments and other purposes in short-term financial products.

The Ministry of Finance and Economy expects the regulatory easing to increase the use of won funds, reduce foreign exchange risk, and help companies and financial institutions make decisions about foreign exchange transactions more quickly. However, it will closely monitor the impact on the market as foreign exchange transactions are further liberalized and strengthen risk management with relevant agencies. The proposed revisions will be finalized after public comments are collected through an advance notice period ending on October 26, and are expected to take effect within the year.

This content was produced with the assistance of AI translation services.