Wiring Foreign Exchange for Overseas Study or Living Expenses Liberalized Beginning July

The Ministry of Finance and Economy (MOFE) announced amendments to the Foreign Exchange Transaction Regulations to be effective July 1. Under the amendments, it will be possible to wire foreign exchange for overseas studies or living expenses without reporting to the government. At the same time, overseas travelers need not report the amount of foreign exchange they take outside the country without reporting to the government. It would be no longer necessary to file forms to sell foreign exchange at domestic banks, and travelers are able to purchase traveler’s cheques and traveler’s cards prior to their travel.

According to the amendment, reporting to the Bank of Korea are no longer necessary for wire transfer of gifts exceeding US$50,000, wire transfer of more than US$100,000 for overseas study and living expenses exceeding and travel expenses exceeding US$50,000.

Travelers are now able to exchange foreign currency, traveler’s cheques and traveler’s cards prior to their travel, and they can sell the remaining foreign currency back to banks without filling out forms for foreign exchange sale.

The amendment also removed the credit card settlement limit of US$500 per transaction, so it would be possible to purchase expensive items from foreign Internet sites with domestic credit cards.

In addition, it allows multi-netting for overseas affiliates of multi-national companies with headquarters in foreign countries, so that the affiliates can settle the difference rather than settling every credit and debit accounts.

In addition to the banks and merchant banks, securities companies and insurance companies will be able to participate in the foreign exchange market, while securities companies with net capital exceeding 100 billion Won and operating net capital adequacy ratio exceeding 300% will be able to deal in over-the-counter foreign exchange derivatives.

Limit on foreign exchange loans to non-residents has been increased to US$10 million, which is the level allowed for general trading companies, from the current US$300,000, so that companies with headquarters in Korea can easily lend operating capital to their overseas affiliates.

Kwon Tae-shin, Director of International Finance at the MOFE, said, “This amendment concludes the second phase of foreign exchange deregulation,” and noted, “because transfer of foreign exchange over a certain amount are reported to the National Tax Services and the customs, so the foreign exchange market should not be shaken by the measure.”

Rae-Jeong Park ecopark@donga.com