BOK To Allow Foreign Currency Loans for Exporters' Domestic Operating Funds Starting on the 27th

Further Expansion of Permitted Uses of Foreign Currency Loans Following Facility Funds
"Expected to Ease Upward Pressure on the Exchange Rate"

The Bank of Korea will allow foreign currency loans for domestic operating funds for export companies starting on the 27th.

Exterior view of the Bank of Korea.

The Bank of Korea announced that, as part of its efforts to stabilize the foreign exchange market and improve foreign exchange supply and demand, it will implement an additional easing of restrictions on the use of foreign currency loans.

In principle, foreign currency loans to residents are limited to actual demand for overseas use only. In other words, the Bank of Korea has lent foreign currency only for payment funds needed when domestic export companies purchase crude oil, raw materials, and machinery and equipment from abroad, or for overseas direct investment. However, in February last year, the Bank of Korea expanded the permitted use of foreign currency loans to include domestic facility funds, in order to improve foreign exchange supply and demand.

With this measure, export companies will be able to borrow foreign currency from foreign exchange banks for domestic operating funds, in addition to domestic facility funds. The loan limit will be based on export performance over the past year or expected export performance for the current year. For companies, this will broaden their borrowing options in light of funding costs. Banks are also expected to benefit through diversification of revenue sources.

An official at the Bank of Korea said, "We expect that, as companies sell the foreign currency raised through foreign currency loans for use in the domestic market, this will help ease upward pressure on the won-dollar exchange rate," adding, "It will also help alleviate imbalances in foreign exchange supply and demand."

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