Barriers lifted in foreign exchange business

All financial companies, ranging from insurers to securities firms, will be able to jump into the foreign exchange (FX) transaction business starting from February, the Ministry of Strategy and Finance announced Thursday.

The ministry said it will allow financial institutions other than banks to engage in the FX business, which will let them make profits from commissions on transactions, by revising the Foreign Exchange Transaction Act, at the request of many financial institutions.

Until now, only large commercial banks have been allowed to enter the FX business, but financial companies other than banks were given permission in certain cases.

In the financial sector, the government’s regulation has been considered an obstacle to growth and competitiveness.

All financial companies will be allowed to execute transfers of up to $3,000 per transaction and $20,000 per year. The ministry said there has been high demand from foreign financial institutions operating in the country.

“Many financial companies, including foreign entities, have been demanding the removal of the regulation,” said Choi Ji-young, director of the ministry’s foreign exchange regulation division. “This will help expand the scope of financial companies’ businesses and add more value to the industry as a whole.”

Companies in the financial technology, or fintech, sector will be allowed to engage in the foreign exchange transfer business if they have agreements with banks, the ministry said.

“The size of the transactions allowed for such firms won’t be large in the trial stage, but it will get bigger later on,” Choi said.

While lifting the regulation, the government will strengthen oversight on those companies in order to ensure soundness of the financial industry as a whole.

“Firms that engage in foreign exchange transactions will be subject to regulations similar to those implemented on banks,” the official said. “Banks could complain of losing an exclusive market, but when the entire FX market gets bigger through competition, banks will benefit more.”

BY SONG SU-HYUN [song.suhyun@joongang.co.kr]