A new regulatory framework has been established allowing overseas financial institutions to conduct won-related operations for non-residents abroad. It will also be possible to open integrated won accounts at domestic foreign exchange banks and use the Bank of Korea's won international payment network for transactions.
On September 16, the Ministry of Finance announced the revision and notification of the 'Guidelines for Foreign Financial Institutions' Foreign Exchange Operations' and 'Foreign Exchange Transaction Regulations.' This revision institutionalizes 'offshore won operations' and the 'Offshore Won Operations Institutions (RFI-K).' Institutions among the existing offshore foreign exchange operations institutions (RFI) wishing to handle won transactions must register separately with the Ministry of Finance.
Once registered, financial institutions can conduct won payments, receipts, deposits, and other operations related to holding, procuring, and managing won for foreign non-residents abroad. They will also be permitted to open won accounts for remittances, investments, and borrowing transactions.
However, there are restrictions on the customer base. Institutions with deposit-taking functions, such as domestic banks and foreign financial institutions, are excluded, limiting the scope to foreign non-residents.
A payment method has also been established. If RFI-K creates an integrated won account at a domestic foreign exchange bank, that bank can connect to the Bank of Korea's won international payment network to settle won transactions that occur abroad. This allows overseas financial institutions to process won payments through the domestic financial network.
To prepare for temporary shortages of won during the payment process, unlimited overdrafts for the purpose of payment support from domestic banks are permitted. The reporting exemption threshold for won borrowing has been raised from 30 billion won to 100 billion won.
Additionally, the reporting obligation for capital transactions denominated in won between non-residents is waived, although domestic real estate transactions are excluded. The government aims to simplify the procedures for won remittances and investments by foreign non-residents.
However, institutions are required to verify and report transaction details with their counterparties. They must confirm whether customers are foreign non-residents and report recipient and payer identification information, transaction amounts, currency types, and transaction and payment dates to the Bank of Korea on a monthly basis.
Measures for soundness management have also been established. The government can restrict the procurement and management methods of won funds, as well as the scope of assets and liabilities of the institutions if necessary. Legal obligations such as customer verification and transaction reporting can be delegated to agents, similar to existing offshore foreign exchange operations institutions.
This initiative follows the 'Roadmap for the Internationalization of the Won' announced by the government in July. The government plans to establish infrastructure and systems that allow the use of won in transactions abroad, alongside the Bank of Korea's won international payment network. It aims to manage the flow of funds and soundness resulting from the expansion of won transactions while operating the system.
A Ministry of Finance official stated, 'We have established a regulatory foundation to enable won transactions and payments for non-residents abroad,' adding, 'We plan to closely monitor transaction details and compliance with obligations in collaboration with relevant institutions such as the Bank of Korea.'
* This article has been translated by AI.
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