November 06, 2010
Audits on banks’ forex dealings - Authorities looking for speculation
Financial authorities have decided to conduct a joint inspection of foreign exchange banks for the second time from next week, after the won gained strength against the U.S. dollar following the second round of quantitative easing by the United States.
According to the Bank of Korea and the Financial Supervisory Service yesterday, a second round of joint inspections of two foreign bank branches’ foreign exchange positions will be conducted from Nov. 15 to 23.
One will be HSBC and the other will be either Deutsche Bank or Citibank Korea, according to an FSS official.
The regulators will look into banks’ forward exchange positions and non-deliverable forwards and inspect whether any foreign exchange transactions were made with an aim to take advantage of the strengthening won.
“Volatility has been expanding across the domestic financial market with massive global liquidity flowing into emerging markets, including Korea,” a high-ranking FSS official told the local media.
“Bank branches operating here that caused chaos in the domestic market by violating regulations in a situation like this should be heavily penalized,” he said, indicating that banks involved in improper foreign exchange derivative trades will be hit with heavy penalties.
In fact, regulators detected a number of speculative transactions in foreign exchange derivatives during the first round of joint inspections conducted from Oct.19 to Nov. 5, according to an industry insider.
The first joint inspection was done on Development Bank of Singapore, Morgan Stanley, BNP Paribas, JP Morgan Chase, Bank of America, Merrill Lynch, Korea Exchange Bank and Shinhan Bank.
Domestic financial authorities first decided to conduct a joint inspection of foreign exchange banks when they realized that foreign funds were rapidly flowing into the local market driven by dollar-carry trades.
The inspection came after rules on currency controls were announced in June as a means to protect the economy from external shocks. The rules put ceilings on domestic banks and branches of foreign banks dealing with foreign exchange forwards and derivatives.
Regulators have postponed inspections of Australia and New Zealand Banking Group because it is the potential buyer of KEB.
Richard Wacker, Chairman of the KEB board, told reporters yesterday that KEB and ANZ are still in negotiations over the price.
http://joongangdaily.joins.com/article/view.asp?aid=2928043
Financial authorities have decided to conduct a joint inspection of foreign exchange banks for the second time from next week, after the won gained strength against the U.S. dollar following the second round of quantitative easing by the United States.
According to the Bank of Korea and the Financial Supervisory Service yesterday, a second round of joint inspections of two foreign bank branches’ foreign exchange positions will be conducted from Nov. 15 to 23.
One will be HSBC and the other will be either Deutsche Bank or Citibank Korea, according to an FSS official.
The regulators will look into banks’ forward exchange positions and non-deliverable forwards and inspect whether any foreign exchange transactions were made with an aim to take advantage of the strengthening won.
“Volatility has been expanding across the domestic financial market with massive global liquidity flowing into emerging markets, including Korea,” a high-ranking FSS official told the local media.
“Bank branches operating here that caused chaos in the domestic market by violating regulations in a situation like this should be heavily penalized,” he said, indicating that banks involved in improper foreign exchange derivative trades will be hit with heavy penalties.
In fact, regulators detected a number of speculative transactions in foreign exchange derivatives during the first round of joint inspections conducted from Oct.19 to Nov. 5, according to an industry insider.
The first joint inspection was done on Development Bank of Singapore, Morgan Stanley, BNP Paribas, JP Morgan Chase, Bank of America, Merrill Lynch, Korea Exchange Bank and Shinhan Bank.
Domestic financial authorities first decided to conduct a joint inspection of foreign exchange banks when they realized that foreign funds were rapidly flowing into the local market driven by dollar-carry trades.
The inspection came after rules on currency controls were announced in June as a means to protect the economy from external shocks. The rules put ceilings on domestic banks and branches of foreign banks dealing with foreign exchange forwards and derivatives.
Regulators have postponed inspections of Australia and New Zealand Banking Group because it is the potential buyer of KEB.
Richard Wacker, Chairman of the KEB board, told reporters yesterday that KEB and ANZ are still in negotiations over the price.
http://joongangdaily.joins.com/article/view.asp?aid=2928043
