Ministry of Finance and Economy

On October 13, the Ministry of Finance and Economy (MOFE) announced proposed amendments to the Foreign Exchange Transactions Regulations for public comment, pursuant to Article 46 of the Administrative Procedures Act. The proposed amendments are intended to implement the foreign exchange (FX) regulatory easing measures outlined in the Roadmap for KRW Internationalization, announced on July 19, which aims to make the Korean won a freely tradable currency in overseas markets. The proposed amendments and measures for interagency coordination have been discussed on several occasions, including meetings with the American Chamber of Commerce in Korea (April 28 and August 19) and the Market Situation Review Meeting (October 2). The key measures are as follows.   First, prior notification requirements for FX banks’ borrowing transactions and the issuance of Korean won-denominated securities by residents and nonresidents will be replaced with ex-post reporting requirements. Taking into account the prudential regulatory frameworks already applicable to banks*, the government will replace the prior notification requirement for long-term borrowings exceeding USD 50 million with an ex-post reporting requirement for borrowings exceeding USD 100 million. Such borrowings must be reported within two business days. In addition, banks’ Korean won borrowings from nonresidents will be treated in the same manner as foreign currency borrowings, with ex-post reporting required only for amounts exceeding KRW 50 billion. Meanwhile, the prior notification requirement for the issuance of Korean won-denominated securities will also be replaced with an ex-post reporting requirement for issuances of KRW 50 billion or less, in line with the treatment of foreign currency-denominated securities linked to the Korean won, for which ex-post reporting applies to issuances of USD 50 million or less.   * These include the foreign currency Liquidity Coverage Ratio (LCR), FX derivatives position limits, and the macroprudential stability levy.   Second, the reporting thresholds for capital transactions involving Korean won lending and borrowing will be raised, and the cash pooling system will be improved. The notification threshold for residents’ Korean won borrowings from nonresidents will be raised from KRW 1 billion to KRW 50 billion per year, while the threshold for FX banks’ Korean won lending to nonresidents will be raised from KRW 30 billion to KRW 50 billion. Furthermore, the cash pooling system, which allows multinational companies to lend surplus funds and borrow funds to cover shortfalls within a pre-notified limit, will be expanded to include Korean won transactions. The maximum cash pooling limit will also be doubled from USD 50 million to USD 100 million, including Korean won funds.   Third, domestic branches of foreign securities firms will be permitted to borrow foreign currency and Korean won funds from nonresidents under the same conditions as domestically incorporated entities. This measure will ease existing restrictions on such borrowings and facilitate the smooth procurement of funds needed for securities settlement, including settlement facilitation payments. Also, the government will improve the investment-dedicated account system to allow foreign investors to invest Korean won held for domestic securities investment and other purposes in short-term financial products.   The easing of capital transaction regulations under the proposed amendments to the Foreign Exchange Transactions Regulations is expected to enhance the usability of Korean won funds, reduce the burden of FX risk, improve convenience in FX transactions, and support greater flexibility and timeliness in decision-making. At the same time, the government will work closely with relevant authorities to ensure effective risk management, including by closely monitoring potential market impacts arising from the ongoing modernization of the FX system.   On October 13, the first day of the public comment period for the proposed amendments, MOFE held a consultative meeting on FX regulatory easing, chaired by the Director General for International Finance and attended by representatives from the Bank of Korea and financial institutions, including banks and securities firms. Participants discussed the background and significance of the proposed amendments and shared their views. Financial institutions expressed support for the objectives of the amendments to promote Korean won internationalization and welcomed the direction of regulatory easing. The proposed amendments will be finalized after collecting public feedback during the public comment period from October 13 to October 26 and are scheduled to take effect by the end of this year.   Please refer to the attache files. 

On October 12, Deputy Prime Minister and Minister of Finance and Economy Lee Hyoung Il chaired the 274th Ministerial Meeting on International Economic Affairs at the Government Complex Seoul. The meeting discussed six agenda items: “Review of External Economic Risks and Policy Responses,” “Status of and Response Plans for Follow-up Negotiations on Services and Investment under the Korea-China Free Trade Agreement (FTA),” “Measures to Enhance the Investment Support Framework for Overseas Investment and Development Projects,” “Second Review of the Implementation of Economic Outcomes from Summit Diplomacy,” “Plan to Develop an Industrial Complex Exclusively for Korean Companies in India,” and “Detailed Implementation Measures for the Global Verified Carbon Market (GVCM).”    * Participants: Deputy Prime Minister and ministers and vice ministers from relevant ministries, including the Ministry of Science and ICT, Ministry of Foreign Affairs, Ministry of Culture,       Sports and Tourism, Ministry of Agriculture, Food and Rural Affairs, Ministry of Trade, Industry and Resources, Ministry of Climate, Energy and Environment, Ministry of Land,                     Infrastructure and Transport, Ministry of SMEs and Startups, and Ministry of Planning and Budget.   Deputy Prime Minister Lee noted that “Korea’s exports have maintained solid momentum, with the current account recording a surplus of $46.11 billion in August, marking the 40th consecutive month of surpluses, demonstrating that the Korean economy has maintained its export competitiveness despite challenging external conditions.” He emphasized, however, that “given the persistently high level of external uncertainty surrounding the Korean economy, it is essential to closely monitor external risks and respond accordingly.”   First, the government reviewed major external economic risks in three areas – trade, supply chains, and the real economy and financial markets – identified through consultations with academia, private-sector exports, and Korean diplomatic missions overseas, and discussed policy responses.   In the area of trade, the government plans to diversify its trade networks and expand trade cooperation with major partner countries in response to risks such as pending trade issues with the United States, strengthened industrial protection measures by the European Union (EU), and deepening trade bloc formation amid the restructuring of the global trading order.   In the area of supply chains, the government will continue to improve supply chain structures to prepare for risks arising from the prolonged conflict in the Middle East and other factors. These efforts will include bolstering domestic production and stockpiles of high-risk economic security items, establishing overseas production capacity, and diversifying import sources. The government also plans to enhance supply chain cooperation with major partner countries, including through summit diplomacy. In the area of the real economy and financial markets, the government proactively reviewed potential risks affecting both the real economy and financial markets, including persistently high global interest rates, fiscal risks in major economies, and the possibility of a correction in AI investment. In particular, continued efforts will be made to maintain market stability by strengthening its monitoring of fiscal developments in major economies and international financial markets, while closely assessing the domestic spillover effects of changes in external financial conditions.   As part of these efforts to step up trade cooperation, the government will also actively engage in follow-up negotiations on services and investment under the Korea-China FTA. Based on the principle of mutually beneficial market opening, the negotiations will aim to deliver substantive outcomes in areas such as culture and finance, thereby improving conditions for Korean companies seeking to expand overseas.   Next, the government reviewed progress in implementing cooperation initiatives established through summit diplomacy with major partner countries, with the aim of translating these efforts into tangible economic outcomes.   Since the previous review at the 269th Ministerial Meeting on International Economic Affairs in June, the foundations for cooperation established through summit diplomacy have continued to expand, with additional memoranda of understanding (MOUs) on economic cooperation signed with countries in Europe, Mongolia, South America, and Central Asia.   The government will continue to track progress and work with relevant ministries to support the smooth implementation of major cooperation initiatives, ensuring that the outcomes of summit-level cooperation contribute to Korea’s economic prosperity. In particular, efforts to deliver tangible outcomes will be strengthened by systematically managing intergovernmental MOUs according to their expected benefits and addressing challenges arising in the process.   Furthermore, as a follow-up measure to turn the achievements of summit diplomacy into concrete projects, the government plans to pursue key cooperation initiatives, including the development of an industrial complex exclusively for Korean companies in India, to help Korean companies boost exports, secure overseas contracts, and establish a stable local presence. Economic cooperation channels with major partner countries, including the Korea-India Finance Ministers’ Meeting scheduled for November, will also be actively utilized to facilitate the smooth execution of these projects.    Measures to enhance the investment support framework for overseas investment and development projects were also discussed to facilitate Korean companies’ overseas business activities. As the global infrastructure market evolves toward high-value-added investment and development projects, the government plans to shift from the existing project-by-project support framework to joint investment platforms organized by country or region, including through government-to-government cooperation, thereby increasing opportunities for Korean companies to participate in overseas projects.   To this end, the government will establish a new Overseas Construction Strategic Fund totaling KRW 3 trillion, using KRW 1 trillion in government funding as seed capital to mobilize domestic and foreign investment. It will also seek to create a virtuous cycle in which overseas contract awards lead to opportunities for Korean SMEs and middle-market enterprises to supply equipment and materials and participate in long-term maintenance activities, ultimately contributing to regional economic revitalization and domestic job creation.   Lastly, detailed implementation measures for the GVCM have been formulated to carry out the GVCM Roadmap announced in December 2025. The GVCM is an international carbon market being developed in cooperation with the United Nations Framework Convention on Climate Change (UNFCCC) and the Global Green Growth Institute (GGGI) to facilitate global carbon trading by offering greater credibility than existing international carbon markets.   Under the GVCM, the government plans to uissue carbon credits that can be used in both compliance and voluntary markets, vestablish a GVCM governance framework that enables participation by developing countries and other stakeholders, and wutilize blockchain technology for recording and issuing carbon credits.   Deputy Prime Minister Lee highlighted, “The government will work as one economic team to respond steadfastly to external uncertainties and create new growth opportunities.” He added, “We will ensure the smooth implementation of the initiatives discussed today so that they deliver concrete results on the ground.” Please refer to the attached files. 

On October 7, Deputy Prime Minister and Minister of Finance and Economy Lee Hyoung Il held a meeting with representatives of six major business organizations at the Korea Chamber of Commerce and Industry (KCCI). During the meeting, he outlined recent economic developments and the government’s economic policy direction and called for cooperation from the business community.   Deputy Prime Minister Lee emphasized that “meaningful changes that businesses can actually feel begin with voices from the field,” adding that “policies can deliver tangible results when the government and the private sector work together on the ground to identify challenges and find solutions.”   He also noted that the government has visited business sites together with the six major business organizations to hear directly about challenges facing businesses and has incorporated measures to address them into major policy initiatives, including the first and second rounds of the “field-oriented measures to support business investment and innovation,” announced on August 13 and October 1, respectively. Against this backdrop, he underscored the importance of continued communication with the business community.   Deputy Prime Minister Lee explained that Korea’s economy has been gaining growth momentum despite challenging economic conditions, supported in part by the global semiconductor boom; at the same time, structural challenges remain, including continued pressures on people’s livelihoods amid inflation, a decline in potential growth due to the shrinking working-age population and stagnant productivity, and polarization across sectors.   He stated, “To take Korea to the next level as an ‘irreplaceable Korea,’ the government will strengthen policy efforts to raise potential growth and reduce economic polarization, and do our utmost to deliver tangible outcomes that people can feel in their daily lives.”   He further highlighted that the government will pursue large-scale, forward-looking investment in future growth areas through initiatives including the three mega-projects, while addressing on-the-ground obstacles to business investment to create a world-class business environment. At the same time, as part of efforts to reduce economic polarization, the government plans to mobilize all available resources and policy tools in three key areas of social policy: housing, employment and financial support for low- and middle-income households.   He also reaffirmed the government’s commitment to strengthening policy support for young people and called on the business community to “continue sharing its views and working with the government so that voices from the field can be fully reflected in policymaking.”   Representatives of the business organizations called for government cooperation to ensure that regulatory approvals, infrastructure and other necessary support are provided in a timely manner in line with corporate investment schedules. They also emphasized the need for tailored AI support for SMEs to help narrow disparities between large companies and SMEs. Regarding the extension of the retirement age, they proposed flexible approaches, including post-retirement reemployment, that would make use of the accumulated experience of older workers while preserving employment opportunities for young people.   The representatives also expressed hope that the launch of the new economic team would mark the beginning of a renewed growth trajectory and stated that they would continue to actively convey voices from the field through channels including the public-private council.   Please refer to the attached files.