Government to Ease FX Market Stability Rules

The government has decided to ease the country’s FX market stability rules as uncertainties in capital flows continue to grow amid fears over the spread of COVID-19.  The rules were first introduced after the 2008 global financial crisis to control excessive capital movements and short-term borrowings, and then have been applied flexibly according to the changes in market conditions. 

Changes in the rules are as follows:

1) Forex futures trading limits to be raised by 25 percent:  Up from 40 percent to 50 percent for local banks and from 200 percent to 250 percent for foreign bank branches in Korea, as a result

2) The levy on financial institutions’ non-deposit FX liabilities[1] to be temporarily lifted for three months from April to June, as well as installment payment plans to be expanded for payments due this year

3) Low FX liquidity coverage ratio (LCR)[2] of 70 percent, down from 80 percent, for a limited period until May, which will be applied as soon as approved by the Financial Services Commission (FSC)  

[1] A 0.1 percent tax on non-deposit FX liabilities which will mature within a year