Korea has penalized HSBC and Credit Agricole for improperly shifting derivatives trades to Hong Kong, Bloomberg reports. The Financial Supervisory Service (FSS) has warned HSBC’s Seoul office for allowing Hong Kong-based dealers to trade interest-rate and currency-swap derivatives.
The South Korean authorities are putting restrictions on oversight of securities trading by foreign banks as swings in capital flows could disrupt financial markets. The government will let local branches of overseas banks hold currency derivatives contracts equivalent to up to 200% of equity capital, down from 250%. Korea will also reduce the cap for domestic banks from 50% to 40%.
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