Foreign exchange controls deregulated

Author: | Published: 1 Aug 2005
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The amendments to the Foreign Exchange Transaction Regulation of Korea (FETR) took effect as of July 1 2005.

The limitation on overseas direct investment by Korean non-financial institutions in respect of foreign financial and insurance industries has been raised from $1 million to $3 million.

Regarding acquisition of overseas real estate by Korean residents (including corporate entities), the amended FETR permits an asset management company or a real estate investment trust established pursuant to the Indirect Investment Asset Management Business Act of Korea and Real Estate Investment Trust Act of Korea, respectively, to acquire overseas real estate without filing a report to the Bank of Korea, as was previously required.

The limitation on lending of Korean won-denominated securities by Korean residents to non-resident borrowers has been increased from W5 billion ($4.8 million) to W10 billion.

The amendments to the FETR have also changed the filing requirements for loans advanced by non-resident lenders to Korean resident borrowers. If a Korean company intends to borrow from non-resident lender(s), it must file a report with (if the loan exceeds $30 million) the Ministry of Finance and Economy or (if the loan equals or is less than $30 million) the designated foreign exchange bank. Pursuant to the amended FETR, whether the loan exceeds $30 million is determined taking into account all of the loans borrowed by the Korean resident borrower from non-resident lender(s) in the past 12 months. Formerly, this determination was made on a transaction basis.