“Excessive foreign-currency borrowing will be restricted.” Chin Dong-soo, the chairman of FSC told on Friday, 25th September.
Looking back what happened after Lehman Brothers’ crisis, the foreign currency liquidity lacked with the high suspicion in the foreign borrowing affordability of domestic banks , which ultimately impacted to the overall financial systemic risk. Aligning with Financial Stability Board, FSC decided to strengthen foreign borrowing policies for no more repeat in the future.
So, these are the points that have been currently being considered.
1) Revision on the Foreign liquidity ratio regulation 2) New Foreign liquidity Risk standards 3) Develop Foreign currency financial derivatives transaction risk standards 4) Strengthen the mid-term, long-term foreign currency loans funding ratio 5) Limit on the foreign asset 6) Reasonable foreign exchange hedge
Also monitoring for macroeconomic soundness will be tighten. Task Force, which are composed of relevant officers and banks and expertise, has been currently working on this issue. The plan will be announced within October.
