ID :
185450
Tue, 05/31/2011 - 07:25
Auther :
Shortlink :
https://oananews.org//node/185450
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Watchdog detects 3 foreign lenders' irregularities
SEOUL, May 31 (Yonhap) -- South Korea's financial watchdog said Tuesday that it has uncovered irregularities, such as illegal commissioning of derivatives trading, by three foreign banks' local branches.
The local branches of the three foreign banks -- HSBC, Credit Agricole and an unnamed European investment bank -- were found to have illegally commissioned out derivatives trading to their branches in Hong Kong and Singapore, according to the Financial Supervisory Service (FSS).
The FSS said it has imposed penalties on the Seoul branches of HSBC and Credit Agricole and is mulling imposing sanctions on the European investment bank.
The financial watchdog has conducted an extensive probe on the local branches of 19 overseas lenders since last year in a bid to boost market stability. Foreign banks' excessive capital flows have often been cited as hurting the country's market stability.
The FSS said it plans to step up inspections into the local branches, including an examination on the capital management of the 14 largest investment banks, whose derivatives balance exceeds 100 trillion won (US$92 billion).
If necessary, the FSS said, it may also expand its joint probe with the central bank into banks' currency forward trading.
In April, the FSS and the Bank of Korea (BOK) inspected four banks -- one local and three foreign banks -- over currency forwards and their handling of "kimchi bonds" amid a surge in short-term overseas debt, which is feared to hurt market stability.
Kimchi bonds refer to foreign-currency debt issued by local and foreign companies in South Korea. Excessive sales of kimchi bonds have been blamed as the main reason for rising short-term foreign debt, putting upward pressure on the local currency.
In a bid to curb the country's growing short-term debt, the government said earlier this month that it will lower the ceiling of foreign exchange derivatives positions held by local and foreign banks by 20 percent. The move goes into effect on July 1.
The local branches of the three foreign banks -- HSBC, Credit Agricole and an unnamed European investment bank -- were found to have illegally commissioned out derivatives trading to their branches in Hong Kong and Singapore, according to the Financial Supervisory Service (FSS).
The FSS said it has imposed penalties on the Seoul branches of HSBC and Credit Agricole and is mulling imposing sanctions on the European investment bank.
The financial watchdog has conducted an extensive probe on the local branches of 19 overseas lenders since last year in a bid to boost market stability. Foreign banks' excessive capital flows have often been cited as hurting the country's market stability.
The FSS said it plans to step up inspections into the local branches, including an examination on the capital management of the 14 largest investment banks, whose derivatives balance exceeds 100 trillion won (US$92 billion).
If necessary, the FSS said, it may also expand its joint probe with the central bank into banks' currency forward trading.
In April, the FSS and the Bank of Korea (BOK) inspected four banks -- one local and three foreign banks -- over currency forwards and their handling of "kimchi bonds" amid a surge in short-term overseas debt, which is feared to hurt market stability.
Kimchi bonds refer to foreign-currency debt issued by local and foreign companies in South Korea. Excessive sales of kimchi bonds have been blamed as the main reason for rising short-term foreign debt, putting upward pressure on the local currency.
In a bid to curb the country's growing short-term debt, the government said earlier this month that it will lower the ceiling of foreign exchange derivatives positions held by local and foreign banks by 20 percent. The move goes into effect on July 1.
