Supervisory Service said it would review banks’
exposure as the country becomes increasing concerned about the
strengthening of the won.
In June, the FSS restricted the amount of
FX derivatives banks based in Korea could hold. Local banks had
to limit their forward positions – including all
derivatives such as currency swaps and non-deliverable forwards
– to 50% of their capital at the end of the preceding
Foreign banks must cap positions at 250% of
capital, though the authorities plan to reduce this limit over
time to the same level as the domestic banks are held
On October 5, FSS governor Kim Jong-chang
said the regulator would conduct a second review of
banks’ exposure, as the government becomes
increasingly concerned over foreign capital inflows.
The FSS said it would review the exposure
of Citigroup, HSBC, DBS, Morgan Stanley, BNP Paribas and JP
Morgan to determine whether they were complying with the
Kim promised to take "aggressive" action
against any bank found breaking the rules.