Bank of Korea Governor Shin Hyun-song pledged to prepare a briefing on won internationalization and the 24-hour foreign exchange market on July 16, acknowledging current explanations are insufficient. The statement came after the Monetary Policy Committee raised the base rate by 0.25 percentage points for the first time in 3 years and 6 months at a meeting held at the Korea Federation of Banks in Seoul. The promise reflects growing market demand for clearer communication as South Korea implements structural reforms to its FX trading system and offshore won settlement mechanisms, with the dollar-won exchange rate fluctuating over 80 won within one month amid foreign investor stock selloffs and the SK Hynix ADR listing issue.
BOK Raises Base Rate 0.25%p After 3 Years 6 Months
The July 16 Monetary Policy Committee meeting focused primarily on the rate increase, with subsequent press conference questions centered on additional rate hike timing, growth rates, inflation, and stock market volatility. Despite being the first monetary policy meeting since 24-hour FX market trading commenced and with the offshore won settlement system pilot scheduled for autumn, FX-related questions did not receive time allocation during the formal Q&A session.
Governor Shin reopened the microphone at the briefing's conclusion, stating "actually today there were no questions about the exchange rate." He briefly covered 24-hour FX trading, the offshore won settlement system, NDFs and deliverable forwards (DF), and the Korea-US interest rate differential in impromptu remarks after scheduled questions ended.
Governor Assesses 24-Hour FX Trading Impact on NDF Market
Shin provided a cautious evaluation of the 24-hour trading initiative. "So far, 24-hour trading has not reduced the NDF market," he stated. "NDF trading is still being conducted extensively and it seems it will take a bit more time." Regarding the connection between interest rates and NDFs, he said "we are continuously monitoring how much the reduction in the interest rate gap with the US affects NDF trading" and added "there is a paper we are preparing on this. We will inform you separately when it is published."
Reporters pursued additional questions about the 24-hour FX market's initial assessment and institutional changes to the offshore won settlement system as the governor departed the briefing venue.
Offshore Won Settlement System Faces 2027 Supervision Timeline
The offshore won settlement system allows foreigners to store and settle won in their own won accounts at overseas "offshore won settlement institutions" without domestic accounts. The system simplifies existing Investor Registration Certificate (IRC) requirements for representative identity verification and notarized corporate document submission, prompting concerns that supervisory systems must be strengthened simultaneously.
According to the government's "Won Internationalization Roadmap," dedicated supervisory infrastructure including monitoring of offshore won settlement institutions targets 2027 completion. This creates a time gap between system implementation and supervisory framework establishment.
Shin Pledges No Regulatory Vacuum Amid Reform Implementation
Governor Shin briefly responded "we will ensure there is no supervisory vacuum" to concerns about the regulatory gap. He added "24-hour FX trading alone does not solve all problems" and "complementary systems must be organized together."
Won internationalization extends beyond trading hours expansion. The reform encompasses changes to trading practices, settlement methods, accounting and risk management, and market participants' work systems. Bank and BOK staff are already adapting to night shifts and new business processes, with trading standards and follow-up procedures under continuous refinement.
FAQ
What did the Bank of Korea do on July 16?
The Monetary Policy Committee raised the base rate by 0.25 percentage points for the first time in 3 years and 6 months at a meeting held at the Korea Federation of Banks in Seoul on July 16.
When will the offshore won settlement system supervision infrastructure be completed?
According to the government's Won Internationalization Roadmap, dedicated supervisory infrastructure including monitoring of offshore won settlement institutions targets 2027 completion.
What did Governor Shin say about the 24-hour FX market's impact on NDF trading?
Governor Shin stated "so far, 24-hour trading has not reduced the NDF market" and "NDF trading is still being conducted extensively and it seems it will take a bit more time."
