Foreign Currency Deposits and Domestic Foreign Currency Business
Foreign currency deposits and domestic foreign currency business cover how banks take, lend, and convert foreign currency inside Korea. The exam tests product rules, conversion pricing, and the distinction between resident and non-resident accounts.
Deposit products and account rules
Foreign currency deposits include current, savings, time, and notice accounts denominated in a convertible currency. They are held with a foreign exchange bank, and the bank verifies the source of funds and the depositor's status. A non-resident may hold a foreign currency account and a non-resident won account, but won conversions and transfers are restricted to permitted purposes. Foreign currency deposits are not automatically convertible into another foreign currency at the same price; each conversion is a separate FX transaction priced off the MAR with a spread.
Domestic foreign currency business
Banks provide foreign currency loans, export and import bill financing, foreign currency securities investment, and FX liquidity management. Foreign currency lending must match a permitted purpose and is subject to foreign currency liquidity and soundness rules.
Worked example
A company receives USD 1,000,000 of export proceeds and sells the USD to its bank. MAR is 1,300.00 and the bank's USD buying spread is 1.5%. The customer receives 1,300.00 × (1 − 0.015) = 1,280.50 KRW per USD, or KRW 1,280,500,000. If it instead keeps the funds in a USD time deposit and converts later, the later conversion uses the then-current rate and spread, so the won amount is not locked.
Traps
- Using the MAR directly instead of the bank's buying or selling rate.
- Applying the selling rate when the customer is selling USD to the bank.
- Assuming a foreign currency deposit is protected from exchange loss.
- Ignoring purpose and documentation rules for foreign currency loans.