Amendment to the Enforcement Decree Of The Foreign Exchange Transactions Act is Passed
The government deliberated and approved the Amendment to the Enforcement Decree of the Foreign Exchange Transactions Act at the 40th Cabinet meeting held on September 25. The amendment aims to provide institutional support for the key tasks of Improvement Measures for Foreign Exchange Market Structure announced on February 7. Foreign financial institutions (FI) that meet relevant requirements and register with the government will have the right to participate in the Korean foreign exchange market as well as corresponding duties.
The amendment highlights are as follows:
Above all, the amendment specifies the scope and requirements of foreign FIs that are eligible for registration. Foreign FIs, which fall in the category of the government-designated sectors (e.g., banking, securities) with financial soundness standards (e.g. Basel III), can be “Registered Foreign Institutions” (RFI), when they meet requirements such as signing sufficient credit line agreements with existing foreign exchange (forex) market participants, and opening won or foreign currency accounts for business purposes. RFIs will then be able to trade in the domestic forex market through forex brokers.
RFIs that directly participate in the Korean forex market will be subject to the same legal obligations as existing market participants, which include the prohibition of violation of sound forex trade order and reporting of key information. The government can monitor whether these institutions are trading in compliance with the order and obligations of Korea’s forex market through the Bank of Korea (BOK).
The amendment will be promulgated on October 4, 2023 and will take effect upon promulgation. At the same time, the government is preparing guidelines (the Ministry of Economy and Finance Notification) that regulate detailed matters including registration requirements, procedures, scope of work and performing method and legal obligations, and plans to implement the guidelines in October after going through legislative procedures such as an administrative notice.
With this amendment in place, the participants in the Korea’s forex market, which have been limited to domestic FIs such as foreign exchange banks and securities companies, will be expanded to include foreign FIs. Doing so will lay the foundation for foreign FIs as well as their clients to better access the Korean forex market. Moreover, the quality and stability of forex services are anticipated to be further improved due to an increase in trading volume and price competition in the domestic market.
Please refer to the attached files.