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Seoul to boost monitoring of local currency market
Nov 28, 2005
In an effort to beef up its monitoring of the currency market as it eases some restrictions on foreign exchange trading next year, the government will permit the central bank to join with the top financial regulator in investigating irregular transactions.
The Finance Ministry said yesterday it would allow the Bank of Korea to conduct joint investigations of foreign exchange transactions with the Financial Supervisory Service, beginning next year. The latter has had the major role in investigating currency trading, while the central bank's role has been limited to managing the market's computer system.
The ministry said last month that it would no longer require prior approval for 16 types of foreign exchange transactions, including foreign companies' borrowing of more than 1 billion won ($960,000) from a local lender or purchase of won-denominated securities worth more than 10 billion won. Under the new regulations, such transactions must only be reported to the government after they have occurred.
"For the three governmental bodies that are entitled to carry out inspections (of the foreign exchange market), the Bank of Korea, the Financial Supervisory Service and the National Tax Service, we will drastically enhance each institution's role to inspect and supervise the market," the Finance Ministry said.
The Financial Supervisory Service, which has not been permitted to gain access to data on foreign exchange transactions recorded on the central bank's computer system, will be granted such access while investigating suspicious transactions.
The Bank of Korea, in particular, will have more regulatory clout, as it will be able to demand documents from domestic financial firms suspected of any irregular foreign exchange transactions, as well as participating in investigations with the Financial Supervisory Service.
"The punitive measures imposed on those who fail to report or get regulators' approval for their foreign exchange transactions, currently limited to cautionary warnings, will be more severe," said Kwon Tae-gyoon, the ministry's director for international finance.