What changes are coming to Korea’s FX market in July?

The market’s operating hours will be extended to 2 a.m. the next day, up from the current 3:30 p.m. close. Registered foreign institutions will also be allowed to take part directly in the market.

How are KB Kookmin, Shinhan, Hana and Woori preparing for the FX market reform?

They are extending FX dealing-room hours, setting up taskforce teams and trying to register overseas branches or corporations as RFIs. Hana has also opened an around-the-clock trading room and plans to send 10 FX specialists in the second half of the year.

Why do banks expect the longer FX market hours to help their business?

Banks expect the reform to attract new participants and capital while expanding non-interest income such as FX business fees. The article says transaction agency services for RFIs could also bring commission income through reporting, account management and related tasks.

Banks gear up for reform of FX market in July

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Summary

Domestic banks are preparing for July reforms that will extend Korea’s FX market hours to 2 a.m. the next day and allow registered foreign institutions to participate. KB Kookmin, Shinhan, Hana and Woori are expanding staffing and infrastructure, with Hana opening an around-the-clock trading room in April. The changes are expected to support non-interest income, though their impact remains uncertain.

Key Facts

The government plans to extend Korea’s FX market hours from 9 a.m. to 3:30 p.m. to 2 a.m. the following day starting in July.
The reform will also let registered foreign institutions directly participate in the FX market.
Hana Bank opened Hana Infinity Seoul, a 2,096-square-meter around-the-clock trading room, in April.
KB Kookmin Bank registered its branches in London and Singapore in February, while Hana registered its London branch in March.
Currently, 22 registered foreign institutions are approved by the government, including overseas branches of domestic banks and foreign banks such as Deutsche Bank, Bank of America and ING Bank.

By Lee Yeon-woo

Published May 26, 2024 3:21 pm KST
Updated May 27, 2024 4:30 pm KST

A person walks by a currency exchange office in Myeong-dong, Seoul, April 16. Yonhap

In preparation for the upcoming reform of the foreign exchange (FX) market, domestic banks are expanding their infrastructure and workforce to strengthen their global competitiveness.

This major change in the FX market is anticipated to serve as a stepping stone for banks to enhance their non-banking profits.

Starting in July, the government will extend the operating hours of Korea's FX market, which currently operates from 9 a.m. to 3:30 p.m., to close at 2 a.m. the following day. It aims to gradually operate the market 24 hours a day. Additionally, registered foreign institutions (RFIs) will be able to directly participate in the FX market.

In response, four major commercial banks, KB Kookmin, Shinhan, Hana and Woori, are proactively preparing for the new opportunities.

Hana Bank is making the most aggressive move. In April, it opened Hana Infinity Seoul, a 2,096-square-meter, around-the-clock trading room.

Other banks are following suit by extending the operating hours of their FX dealing rooms and launching taskforce teams for preparation.

At the same time, they are also making efforts to designate their overseas corporations or branches as RFIs. This aims to create a structure for 24-hour FX trading while simultaneously strengthening the Korean won business overseas.

For instance, KB Kookmin Bank first registered its branches in both London and Singapore this February. After registering its London branch in March, Hana Bank aims to dispatch 10 officials with FX expertise in the second half of this year. Shinhan Bank recently applied for RFI registration for its branches in London and India, and is preparing to register its branch in Vietnam. Similarly, Woori Bank is reviewing various markets, including those in London and Southeast Asia.

Interest in transaction agency services for RFIs is rising as well. Domestic banks can earn commission income by handling FX transaction reporting, account management and other related tasks for RFIs that are not based in Korea.

Currently, 22 RFIs are approved by the government, including the overseas branches of domestic banks as well as those of foreign banks such as Deutsche Bank, Bank of America and ING Bank.

The banking sector anticipates that the new market will attract new participants and capital. In particular, the expansion of non-interest income, such as foreign exchange business fees, is expected to enable further revenue diversification.

The government has also emphasized the active roles of banks in the successful restructuring of the FX market, calling the measure "a crucial infrastructure for the Corporate Value-up."

However, whether the change will bring the anticipated impacts on the industry remains to be seen. Last year, China also expanded its FX market operation until 3 a.m., but there was no meaningful increase in transaction amounts.

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