On September 16, the Ministry of Finance and Economy (MOFE) announced that it issued amendments to the Guidelines on Foreign Exchange Affairs of Registered Foreign Institutions (MOFE Public Notice; “RFI Guidelines”) and the Foreign Exchange Transactions Regulations (MOFE Public Notice).

The amendments reflect feedback collected from relevant institutions, industry stakeholders, and experts during the public consultation period (August 24 – September 3), and have undergone all necessary procedures, including regulatory review by the Office for Government Policy Coordination.

The amendments are intended to establish an offshore Korean won settlement system, as announced on July 19 in the “Roadmap for KRW Internationalization,” which sets out a vision for enabling the Korean won to be freely traded overseas. The key amendments are as follows.

First, the amendments establish a regulatory framework for “offshore KRW business,” defined as foreign exchange (FX) business involving the Korean won conducted overseas for non-residents, and for “Registered Foreign Institutions for KRW Business (RFI-K^*),” while setting out detailed procedures for registration, modification, and termination.

^* Registered Foreign Institution for KRW Business: A KRW-specific license for existing RFIs.

Under the amended notices, foreign financial institutions registered with MOFE will be able to open omnibus accounts with domestic FX banks and settle KRW transactions through the BOK-Wire^Int, thereby enabling offshore KRW settlement. Eligible customers, however, will be limited to non-resident foreign nationals, excluding foreign financial institutions with deposit-taking functions, such as banks.

In addition, unlimited KRW borrowing from domestic banks in the form of overdrafts will be permitted for settlement purposes, thereby minimizing settlement risk. Reporting requirements for KRW-denominated capital transactions between non-residents will also be waived, except for transactions involving domestic real estate, facilitating freer KRW transactions by non-residents.

Meanwhile, as institutions engaging in offshore KRW transactions, RFI-Ks will be required to verify that their customers, as counterparties to such transactions, are non-residents and to comply with statutory obligations to report information on major transactions to the FX authorities. As with existing RFIs, RFI-Ks will also be permitted to delegate the performance of these obligations to designated agents. The government plans to apply appropriate prudential oversight to RFI-Ks and, together with the Bank of Korea and other relevant institutions, closely monitor their transaction records and compliance with applicable obligations.

Please refer to the attached files.