Exporters will be allowed to hire a foreign exchange broker to convert currencies instead of directly transacting through a financial firm, the Ministry of Economy and Finance said Friday.
The revision to the Foreign Exchange Transactions Act passed the Cabinet the same day, which is part of the government effort since earlier this year to improve Korea’s foreign exchange system to make foreign funds more accessible.
The government expects the broker system to promote price competition among financial firms and to raise their clients’ convenience in currency exchange.
The government hasn’t yet specified the conditions a foreign exchange broker would need to meet to obtain a license for the role but noted Bloomberg and Reuters as some of the overseas cases that offer a similar service.
The broker will show prices offered by multiple financial institutions, like banks and brokerage firms, to its clients, help place an order and process the deal.
“Through the foreign exchange broker, customers will be able to proceed with the transaction after confirming favorable price conditions,” the ministry said in a statement.
“That will expand clients’ options, raise the convenience of transactions, and also promote price competition among financial firms,” it added.
The ministry also vowed to ease regulations on the foreign exchange market to “flexibly respond to external shocks.”
The current system only allows the government to give orders, including trade suspensions and asset selloffs, when a natural disaster occurs.
But it vowed to cooperate with the private sector in advance. Instead of giving orders, it will “advise” the private sector on how to respond when an emergency occurs and receive their execution plans.
The current order-based system is “an extremely strong measure,” a ministry official said. “So the system has never been activated. And the role of the private sector on the economy is too big that it’s difficult to respond to crisis without cooperation.”
Korea plans to open its currency market to global traders under a pilot program in January. Starting in July, it will also extend onshore trading hours until 2 a.m. from the current 3:30 p.m. while keeping the beginning of the trading time unchanged at 9 a.m.
Currently, the won can only be directly traded with the dollar via local banks.
BY JIN MIN-JI [firstname.lastname@example.org]