South Korea is set to raise the annual cap for individuals' overseas fund transfers without prior notice from $50,000 to $100,000, thereby easing the daily foreign exchange procedures for citizens.
This significant measure is a key feature of the forthcoming revision to the Foreign Exchange Transaction Act by the Ministry of Strategy and Finance, as stated in an administrative notice on Thursday.
The revision encompasses various modifications that will have an impact on capital transactions. Notably, 31 categories, including parent company guarantees for local borrowings by a securities firm's overseas subsidiary, will transition to a post-reporting system, eliminating the previous requirement for a bank's preliminary report.
In order to assist firms borrowing foreign currency, the threshold for reporting such transactions to the Ministry of Strategy and Finance and the Bank of Korea will be raised from $30 million to over $50 million annually.
This initiative aims to expedite foreign currency fundraising and reduce the burden of overseas investments. Additionally, the routine reporting requirement for foreign direct investment is scheduled for elimination.
To promote competition among financial institutions and expand options for consumers, the government plans to allow major securities companies (comprehensive financial investment entities) to offer general currency exchange services to all customers, not exclusively limited to corporate clients as was previously the case.
Previously, this service was restricted to four securities firms with a capital exceeding 4 trillion won ($3 billion) or holding a short-term financial business permit.
The amendment also focuses on creating a more streamlined investment experience for foreign investors by simplifying domestic currency exchange procedures, thus enhancing their access to the South Korean capital market.
Going forward, foreign investors will be able to directly convert their foreign currency funds for investment in domestic securities without any requirement to pre-deposit in the country.
South Korean government has unveiled plans to establish the Foreign Exchange System Development Committee. This committee aims to improve the procedural validity of legal interpretations by gathering diverse insights from related agencies, the industry, and academia.
The amendment is expected to be implemented in the latter half of the year, following the conclusion of the administrative notice period on June 18.
Write to Jin-gyu Kang at
josep@hankyung.com
