Easy Investment in Korean Government Bonds... Government Opens Integrated Account Exclusively for Foreigners

Significant Relief of Restrictions on Foreigners' KRW Transactions Using National Bond Integrated Accounts

A foreigner-only account system (Integrated Government Bond Account) that allows foreigners to easily invest in Korean government bonds will be launched on the 27th.

The Ministry of Economy and Finance announced on the 26th that it will officially open the Integrated Government Bond Account system linked with international central securities depositories (ICSD) such as Euroclear and Clearstream.

The Integrated Government Bond Account is a consolidated account opened by ICSDs such as Euroclear and Clearstream for foreign investors in the investment country. Although government bonds are traded under the name of the ICSD, the transaction results belong to the actual owner.

Euroclear and Clearstream are the world's largest ICSDs, holding securities worth 3.77 trillion euros and 1.8 trillion euros respectively as of the end of last year.

Until now, foreign investors who wanted to purchase Korean government bonds had to appoint a custodian bank in Korea, open foreign currency and won accounts in their own name, and could only make currency exchange and government bond payment settlements through those accounts.

However, by using the Integrated Government Bond Account, these cumbersome procedures are no longer necessary, and currency exchange and government bond payment settlements can be made using accounts under the name of the ICSD and the custodian bank appointed by the ICSD.

Along with this, a special measure for won transactions using the Integrated Government Bond Account will also be implemented. First, after currency exchange through a foreign financial institution (RFI), funds can be remitted directly to the ICSD-named account without passing through the investor's own account. Additionally, government bonds can be utilized overseas not only for trading but also for repurchase agreements (Repo) and other purposes.

An official from the Ministry of Economy and Finance said, "By using ICSD, even without having an account in Korea under their own name, foreign investors can invest in Korean government bonds at competitive exchange rates, which is expected to improve investment convenience for new foreign investors entering the Korean government bond market for the first time."

Finally, temporary won borrowing through ICSD will also be permitted. Earlier in March, the government allowed foreign investors to temporarily borrow won from domestic banks where they have accounts to reduce the burden of securities settlement failures. Going forward, foreign investors will also be allowed to borrow won directly from the ICSD within the ICSD-named account.

The Ministry of Economy and Finance stated, "As a result, new foreign investors without domestic accounts will be able to borrow won, and existing foreign investors with accounts will be able to reduce the time and cost required to enter into new credit agreements with domestic banks."

The Ministry of Economy and Finance has announced the administrative notice for amendments to the 'Foreign Exchange Transaction Regulations' and the 'Guidelines on Foreign Exchange Business of Foreign Financial Institutions' containing these special measures, and after related procedures, the measures will be officially implemented on the 28th.

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