Magnetic-stripe cards on way out

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Magnetic-stripe cards on way out

Debit cards with magnetic stripes are going to be harder to use in Korea in the future as financial regulators plan to limit when they can be used at ATMs from March.

Such cards will no longer be accepted at automated teller machines - at first during part of the day, then completely phased out by September, announced the Financial Supervisory Service (FSS) yesterday.

The watchdog was talking at one of four sessions during which it explained its 2012 regulatory direction for the banking, insurance, investment and other sectors.

Officials advised card holders to switch to integrated circuit (IC) cards, which are recognizable by the gold-colored turtle-shell patterned chip visible on the front of the card.

“An overwhelming number of credit cards in Korea have both magnetic stripes and integrated circuits, which allows them to be used in stores or foreign countries where only magnetic stripes can be used,” said an official from the IT supervision department at the FSS.

He added that the move to make the cards invalid at ATMs is not expected to inconvenience consumers as they only accounted for 5 percent of usage at ATMs in the country as of December 2009. Some 98 percent of the machines currently accept IC cards, he said.

The FSS said it plans to step up its supervision of local banks’ foreign liquidity this year until risks over the ongoing euro zone debt crisis subside.

“There have been signs of recovery in the euro zone, but until Europe’s debt problems are resolved, the regulator plans to keep up its strict management of liquidity and may consider such factors when evaluating banks,” said Kim Young-dae, an FSS official.

As part of efforts to combat problems that may arise from the euro zone, the FSS plans to continue its regular stress tests on local banks. The stress tests are designed to evaluate whether banks can weather choppy seas, and are based on scenarios similar to the 2008 global financial crisis.

Meanwhile, the FSS said it plans to induce banks to refrain from excessively expanding their foreign currency assets. It will also look into the foreign currency management plans of banks with mid- and long -term refinancing rates of less than 100 percent.

Korean banks’ mid- and long-term refinancing rate stood at 174.4 percent as of the end of December, and has remained above 150 percent since July.

The rollover rate measures the percentage of fresh overseas borrowing against foreign debts that mature in one year or less.

A refinancing rate of more than 100 percent indicates that local lenders have acquired more fresh foreign loans than the amount spent refinancing their maturing foreign debts.

Plans to set up guidelines to better supervise the liquidity conditions of local banks’ overseas units will also be established, the FSS said.


By Lee Jung-yoon, Yonhap [joyce@joongang.co.kr]

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