National Pension Service "Discussing Currency Swap Agreement with Bank of Korea"

[Image source=Yonhap News]

[Asia Economy Reporter Kwangho Lee] Lee Tae-su, Acting Chairman of the National Pension Fund Management Committee (Fund Committee), announced on the 23rd at the Fund Committee meeting that “we will discuss the progress of the currency swap agreement between the National Pension Service and the Bank of Korea.”

Lee Tae-su, Acting Chairman of the Fund Committee (President of the Korea Institute for Health and Social Affairs), made this statement during his opening remarks at the 5th meeting of the National Pension Fund Committee held in the afternoon at the President Hotel in Jung-gu, Seoul.

The acting chairman said, “We will report on the progress of the Fund Committee subcommittee discussions regarding the promotion of the foreign exchange swap agreement between the National Pension Service and the Bank of Korea, as well as the revision of guidelines related to fiduciary responsibility activities,” adding, “We intend to review and approve the amendment to the National Pension Fund Management Guidelines to raise the limit on short-term foreign currency funds for the efficient overseas investment of the National Pension Service.”

He stated, “Since the beginning of this year, uncertainties in domestic and international financial markets have continued, including the strengthening of the U.S. Federal Reserve’s monetary policy stance, increased preference for safe assets, and a global dollar strength,” and added, “In the first half of this year, both stocks and bonds showed weakness, resulting in poor performance of major domestic and foreign pension funds,” further emphasizing, “As global financial market volatility continues, we must continuously monitor macroeconomic and financial market changes and respond promptly.”

The core agenda of this Fund Committee meeting is to discuss the currency swap agreement being pursued by the National Pension Service and the Bank of Korea. The committee will also review amendments to the National Pension Fund Operation Plan for this year and the National Pension Fund Management Guidelines. If the currency swap contract is finalized, the National Pension Service will provide Korean won to the Bank of Korea and be able to invest overseas in dollars through foreign exchange reserves. This marks approximately 14 years since the termination of the currency swap between the two institutions in 2008.

With the strengthening of overseas investments, the National Pension Service invests $20 to $30 billion annually in overseas stocks, bonds, and alternative investments. Due to the National Pension Service’s foreign exchange open policy, it has been criticized for not hedging in this process, which is said to have contributed to the rise in exchange rates. Additionally, through guideline revisions, the National Pension Service plans to raise the short-term foreign currency fund limit to $3 billion. Currently, the short-term foreign currency fund limit for the National Pension Service is $600 million based on the quarterly average balance.

This content was produced with the assistance of AI translation services.