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FX regulations in Korea and their regulatory interconnectedness

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Frame of Image htening FX regulations to stabilize the financial markets and minimize the related risks in the real economy. So far, the regulations have served to improve the structure of FX loans and in stabilizing the FX market and macro economy, but it may be necessary to examine their interconnectedness, if any, among the FX regulations themselves. Some FX regulations adopted after the global crisis may in fact overlap, adding to the overall cost to financial institutions. But at the same time, a number of regulations are complementary, precluding investors from making gains from regulatory arbitrage in the FX market by evading regulations.
Table Ⅲ.1 Regulation on FX Liquidity Ratio for Domestic Banks
FX regulations Period Computation FX assets (maturity within 3 months) FX liabilities (maturity within 3 months) Benchmark Above 85% (other financial institutions 80%) Above -3% Above -10% Above 100%
2. Current FX Regulations
The Korean government currently regulates the FX position, FX financing, and FX assets & liabilities of domestic financial institutions to control external debt expansion and maintain foreign exchange stability in Korea. The regulation on FX position, adopted since the crisis, places a cap on the overall position and forward position of banks. Before the global financial crisis, the forward position of banks led to an increase in
Within 3 months FX liquidity ratio Within 7 days Within 1 month Long-term FX financing ratio Over 1 year
(FX assets - FX liabilities) Total


Full Text
Title FX regulations in Korea and their regulatory interconnectedness
Similar Titles
Material Type Reports
Author(English)

Kim, Chung-Han; Park, Sungwook

Publisher

Korea Institute of Finance

Date 2012-01
Series Title; No Korean Economic and Financial Review
Pages 4
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Economic Administration
Economy < Economic System
Holding Korea Institute of Finance