S. Korea to allow foreign investors' Korean won overdrafts, ease FX regulations

South Korea will allow offshore investors' overdrafts of the Korean currency over the course of foreign exchange transactions and will ease relevant regulations in an effort to improve their access to bond trading and promote investment, the finance ministry said Wednesday.

It is part of the government's planned revision to the Foreign Exchange Transactions Regulations, which come along with the envisioned implementation of omnibus accounts by clearing houses Euroclear and Clearstream for Korean bond trading, according to the Ministry of Finance and Economy.

The two clearing houses will open a link with the Korean Securities Depository on Thursday, through which offshore investors will be able to freely transfer their Korean won between their own accounts and the international central securities depositories (ICSDs).

Foreign investors will not have to have standing agents or open cash-based accounts for foreign exchange transactions if they use the omnibus accounts, the ministry said.

The revision will also allow foreign investors' overdrafts of the Korean currency from the ICSD accounts so as to make their currency exchange easier and to help them save time and costs.

The Korean won settlements through ICSDs between non-residents will be possible so that foreign investors using omnibus accounts can settle transactions for government bonds and repurchase agreement trading, among other things, in the Korean currency.

The revision will come into force Friday.

"The move is expected to help boost liquidity in the market and to facilitate bond investment by foreign investors," a ministry official said. "It also helps our efforts to incorporate Korean Treasury bonds into the World Government Bond Index." (Yonhap)