Korean Regulator suspends state street forex Business

LOSSES & LAWSUITS

SEOUL - South Korea's financial regulator has suspended the foreign exchange (FX) business of State Street's Seoul branch for a month, following the discovery of violations to forex regulations.

The Financial Supervisory Service (FSS) suspended the institutional asset manager's licence for FX trading from May 14 to June 13, which includes futures and FX swaps.

"This action was handed down because of the way we booked our internal non-deliverable forward (NDF) FX transactions between our Seoul and Hong Kong branches in the period from 2001-2005," said a Boston-based spokesperson at State Street. "At no time were any of our customers or market counterparties affected by State Street's decisions regarding these internal foreign exchange accounting methods, and in 2005 we adopted an alternative hedging methodology acceptable to the FSS."

The FSS is to strengthen the monitoring activities of the operational risk management of financial services firms, according to the Korea Development Bank.

The government-run policy bank said the FSS will map out measures to press banks and brokerages to control operational loopholes, and plans to conduct on-the-spot inspections on several bank branches.