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Banks join authorities to stem currency weakness

Published: 18 Jan. 2026, 15:23 Updated: 19 Jan. 2026, 17:38

A pedestrian walks by ATMs in Seoul on Jan. 4. [YONHAP]

Korea's major commercial banks are stepping up efforts, alongside government foreign exchange (FX) authorities, to curb the local currency's recent weakness, offering incentives for customers to sell U.S. dollars and lowering interest rates on foreign-currency deposits, sources said Sunday.

The won has hovered near the closely watched 1,450-won level against the U.S. dollar recently despite authorities' verbal intervention and policy measures, pressured by broad dollar strength, geopolitical risks and strong overseas equity investment by local investors.

The currency was quoted at 1,473.6 per dollar Friday, resuming declines after a one-day rebound that ended a 10-session losing streak.

Authorities have asked banks to take active steps to stabilize the foreign exchange market.

The Financial Supervisory Service (FSS) plans to meet with major commercial banks Monday to urge restraint in marketing that promotes the U.S. dollar and other foreign currency deposits, according to industry sources.

Last week, officials from the Bank of Korea met with local lenders to review required reserves on foreign currency deposits and related interest rate levels. The central bank has announced a temporary plan to pay interest on foreign currency required reserves to boost domestic dollar liquidity and support the won.

"We are holding promotional events for exporters and other customers converting foreign currency into the won and are considering various additional steps to support the government's exchange rate policy," a KB Kookmin Bank spokesperson said.

Woori Bank has cut the dollar interest rate on its foreign currency deposit product tailored for overseas travel to 0.1 percent from 1 percent, aiming to reduce incentives to hold dollar deposits.

A screen in Hana Bank's trading room in central Seoul shows the Kospi closing at 4,840.74 points on Jan. 16, up 43.19 points, or 0.9 percent, from the previous trading session. [YONHAP]

The discussions follow a meeting earlier this month between the Ministry of Economy and Finance and FX marketing managers at major banks, where the ministry called for curbs on banks' aggressive marketing practices, such as exchange rate discounts on dollar transactions, the sources said.

Insurers plan to review whether their controls related to the sale of foreign currency insurance products are working properly, sources said, after FSS Gov. Lee Chan-jin ordered regulators to guide financial firms to refrain from excessive marketing of foreign currency-based deposits and insurance products.

Sales of dollar-denominated insurance products, in which premiums and payouts are made in U.S. dollars, have soared in recent months. Authorities have warned that speculative demand for such products is one factor weighing on the won.

"Sales of dollar-denominated insurance products have surged, and related consumer complaints are being filed steadily," an FSS spokesperson said. "We plan to review the results of insurers' internal checks and conduct inspections, if necessary."

Yonhap