Exchange Rate Nears 1,500 Won... FSS Convenes Banks for Emergency Review of Foreign Currency Funding

by Kwon Haeyoung

Published 09 Mar.2026 14:31(KST)

Updated 10 Mar.2026 08:36(KST)

With Oil Prices Surpassing $100, Won-Dollar Exchange Rate Exceeds 1,490

Key Bank Executives Responsible for Foreign Currency Funding to Be Convened on March 11

As international oil prices have risen, the KRW-USD exchange rate has surpassed 1,490 won, prompting financial authorities to conduct an emergency inspection of foreign currency liquidity in the banking sector. Authorities plan to convene key bank executives responsible for foreign exchange in order to conduct a detailed assessment of banks' foreign currency funding conditions and capital flows. They will also discuss step-by-step response measures in preparation for a further rise in the exchange rate.


Exchange Rate Nears 1,500 Won... FSS Convenes Banks for Emergency Review of Foreign Currency Funding 원본보기 아이콘

According to financial authorities on March 9, the Financial Supervisory Service will convene vice presidents in charge of foreign currency funding at major commercial banks on March 11 in the afternoon, with the meeting presided over by the deputy governor overseeing the banking sector. They will review foreign currency funding conditions, assess market circumstances, and discuss future response measures.


A representative from the Financial Supervisory Service stated, "Given the higher level of the KRW-USD exchange rate, we plan to inspect the foreign currency funding market conditions among banks. So far, there have been no unusual signs in foreign currency funding, but in anticipation of the possibility that high exchange rates may persist, we will urge banks to thoroughly manage their foreign currency liquidity."


Recently, due to the aftermath of the U.S. airstrikes on Iran, international oil prices have exceeded 100 dollars per barrel, and the KRW-USD exchange rate has also surpassed 1,490 won. As concerns over 'stagflation,' which refers to rising prices amid an economic downturn, have grown, risk aversion sentiment has strengthened and demand for the U.S. dollar, a representative safe asset, has increased as a result.


On the 9th, when the sell-side circuit breaker was triggered as the KOSPI fell more than 6% intraday, employees at the Seoul Hana Bank head office dealing room were monitoring the stock market and exchange rates. On that day, the KOSPI opened at 5,265.37, down 319.50 points (5.72%) from the previous trading day on the 9th, and the KOSDAQ opened at 1,096.48, down 58.19 points (5.04%). March 9, 2026 Photo by Jo Yongjun

On the 9th, when the sell-side circuit breaker was triggered as the KOSPI fell more than 6% intraday, employees at the Seoul Hana Bank head office dealing room were monitoring the stock market and exchange rates. On that day, the KOSPI opened at 5,265.37, down 319.50 points (5.72%) from the previous trading day on the 9th, and the KOSDAQ opened at 1,096.48, down 58.19 points (5.04%). March 9, 2026 Photo by Jo Yongjun

원본보기 아이콘

Currently, financial authorities assess that foreign currency liquidity among domestic banks is relatively stable. According to the Financial Supervisory Service, as of the third quarter of last year, the foreign currency liquidity coverage ratios (LCR) of the four major commercial banks were as follows: Hana Bank at 175.11%, Shinhan Bank at 157.6%, KB Kookmin Bank at 143.4%, and Woori Bank at 138.9%. These figures greatly exceed the minimum regulatory requirement set by the financial authorities, which is 80%.


The foreign currency LCR is an indicator representing the ratio of high-quality liquid foreign currency assets to the expected net foreign currency outflows over the next 30 days, and it demonstrates a bank’s ability to respond to short-term foreign currency liquidity needs. Based on this indicator alone, it appears that the likelihood of a "dollar shortage" occurring is not high.


Market indicators are also showing stable trends. The swap basis, which reflects the cost of foreign exchange swap (FX swap) transactions-borrowing won and procuring dollars-remains at a low level, indicating that foreign currency funding conditions are relatively smooth, according to the Financial Supervisory Service.


Exchange Rate Nears 1,500 Won... FSS Convenes Banks for Emergency Review of Foreign Currency Funding 원본보기 아이콘

However, financial authorities are closely monitoring the situation, as they believe that if the high exchange rate persists for an extended period, the burden of managing foreign currency liquidity for banks could increase. Since banks are the main players in foreign currency funding, the authorities are closely monitoring market conditions and checking foreign currency liquidity indicators in real time.


A representative from the Financial Supervisory Service explained, "Currently, foreign currency liquidity in Korea is generally ample, and banks are not facing significant difficulties in raising funds," but added, "Given the growing volatility in exchange rates, we are proactively inspecting and preparing for any potential changes."


In addition, financial authorities are paying attention to the possibility that a prolonged high exchange rate could increase the value of financial companies' foreign currency assets, thereby affecting banks’ lending capacity. As the value of the dollar rises, the won-denominated value of banks’ foreign currency assets increases, which can act as a factor in increasing risk-weighted assets (RWA), potentially restricting lending capacity. However, the Financial Supervisory Service currently views such effects as limited and stated that there are no immediate plans to ease related regulations.

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.