South Korea’s major commercial banks, in collaboration with government foreign exchange authorities, are intensifying efforts to address the recent depreciation of the local currency. They are encouraging customers to sell U.S. dollars by offering incentives and reducing interest rates on foreign-currency deposits. Despite verbal interventions and policy measures, the won has been trading near 1,450 won against the U.S. dollar due to various factors like dollar strength and geopolitical risks.
Authorities have urged banks to take proactive measures to stabilize the foreign exchange market. The Financial Supervisory Service (FSS) is set to meet with major commercial banks to discourage aggressive marketing promoting the U.S. dollar and other foreign currency deposits. The Bank of Korea (BOK) officials recently reviewed required reserves on foreign currency deposits and adjusted interest rates to support the won.
To support the government’s exchange rate policy, banks are organizing promotional events for customers converting foreign currency into the won. Woori Bank, for instance, has reduced the dollar interest rate on its foreign currency deposit product for overseas travel. Insurers are also reviewing their controls on the sale of foreign currency insurance products following regulatory guidance to curb excessive marketing practices that contribute to speculative demand affecting the won.
