South Korea will seek additional measures to prevent volatile capital inflows and outflows from bringing instability to its foreign exchange market, the top financial regulator said Wednesday.
"South Korea will carefully review whether the country has a problem in foreign currency liquidity and what additional prevention measures it needs," Chin Dong-soo, chairman of the Financial Services Commission (FSC) told a forum here.
Chin said the current crisis in southern European showed emerging economies without reserve currencies could suffer instability in their foreign exchange markets and subsequent setbacks in financial systems and real economies due to the volatile flight of foreign capital.
To address the foreign currency liquidity issue, the country has raised the need to draw up solutions in the framework of the G-20 meetings and the Financial Stability Board, an international council dedicated to global financial regulations, the chairman said.
"The country will continue to make efforts to prevent investors' herd behavior and improve structural weakness in the foreign exchange sector," the FSC chief said.
In November, the FSC adopted foreign exchange liquidity rules, which makes financial companies increase the proportion of long-term foreign debts while lowering short-term borrowing ratio.
During the global financial crisis last year, domestic banks had to rely on government foreign currency holdings to refinance their maturing short-term debts, as a sharp fall in the South Korean won against the U.S. dollar and the global credit market freeze shut off channels for foreign borrowing.//Yonhap
"South Korea will carefully review whether the country has a problem in foreign currency liquidity and what additional prevention measures it needs," Chin Dong-soo, chairman of the Financial Services Commission (FSC) told a forum here.
Chin said the current crisis in southern European showed emerging economies without reserve currencies could suffer instability in their foreign exchange markets and subsequent setbacks in financial systems and real economies due to the volatile flight of foreign capital.
To address the foreign currency liquidity issue, the country has raised the need to draw up solutions in the framework of the G-20 meetings and the Financial Stability Board, an international council dedicated to global financial regulations, the chairman said.
"The country will continue to make efforts to prevent investors' herd behavior and improve structural weakness in the foreign exchange sector," the FSC chief said.
In November, the FSC adopted foreign exchange liquidity rules, which makes financial companies increase the proportion of long-term foreign debts while lowering short-term borrowing ratio.
During the global financial crisis last year, domestic banks had to rely on government foreign currency holdings to refinance their maturing short-term debts, as a sharp fall in the South Korean won against the U.S. dollar and the global credit market freeze shut off channels for foreign borrowing.//Yonhap
reporter
Park Sae-jin
swatchsjp@ajunews.com
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