South Korea subjects banks to new regulations on forward deals

South Korea has tightened control over foreign exchange liquidity. The Financial Services Commission watchdog said the measures would enhance the soundness of banks’ foreign currency assets but were not intended to curb the won’s advance. One measure called on banks to hold at least 2 percent of their total foreign assets in foreign treasury bonds rated A or above, or set aside a certain amount of safe foreign assets, such as treasuries, in proportion to the value of liabilities maturing within a year. The measure will not apply to foreign bank branches in the country. However, restrictions were placed on both local banks and foreign bank branches in trading foreign exchange in forward markets.

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