Seoul, Jan 18 (IANS) South Korea’s major commercial banks are stepping up efforts, alongside government foreign exchange authorities, to curb the local currency’s recent weakness, offering incentives for customers to sell U.S. dollars and lowering interest rates on foreign-currency deposits, officials said on Sunday.

The won has hovered near the closely watched 1,450 won level against the U.S. dollar recently despite authorities’ verbal intervention and policy measures, pressured by broad dollar strength, geopolitical risks and strong overseas equity investment by local investors.

The currency was quoted at 1,473.6 per dollar on Friday, resuming declines after a one-day rebound that ended a 10-session losing streak, reports Yonhap news agency.

Authorities have asked banks to take active steps to stabilise the foreign exchange market.

The Financial Supervisory Service (FSS) plans to meet major commercial banks Monday to urge restraint in marketing that promotes the U.S. dollar and other foreign currency deposits, according to industry sources.

Last week, officials from the Bank of Korea (BOK) met with local lenders to review required reserves on foreign currency deposits and related interest rate levels. The central bank has announced a temporary plan to pay interest on foreign currency required reserves to boost domestic dollar liquidity and support the won.

“We are holding promotional events for exporters and other customers converting foreign currency into the won and are considering various additional steps to support the government’s exchange rate policy,” a KB Kookmin Bank official said.

Woori Bank has cut the dollar interest rate on its foreign currency deposit product tailored for overseas travel to 0.1 percent from 1 percent, aiming to reduce incentives to hold dollar deposits.

The discussions follow a meeting earlier this month between the finance ministry and FX marketing managers at major banks, where the ministry called for curbs on banks’ aggressive marketing practices, such as exchange rate discounts on dollar transactions, the sources said.

Insurers plan to review whether their controls related to the sale of foreign currency insurance products are working properly, officials said, after Financial Supervisory Service (FSS) Gov. Lee Chan-jin ordered regulators to guide financial firms to refrain from excessive marketing of foreign currency-based deposits and insurance products.

Sales of dollar-denominated insurance products, in which premiums and payouts are made in U.S. dollars, have soared in recent months. Authorities have warned that speculative demand for such products is one factor weighing on the won.

“Sales of dollar-denominated insurance products have surged, and related consumer complaints are being filed steadily,” an FSS official said. “We plan to review the results of insurers’ internal checks and conduct inspections, if necessary.”

—IANS

na/