The Financial Services Commission (FSC) made amendments to financial investment regulations to strengthen financial investment companies’ risk management of foreign currency derivative products. Under the amended regulation, starting from April 12, financial investment companies and universal financial companies are required to set and implement their own guidelines on risk management of foreign currency derivative products.

As banks do since January 1, financial investment companies and universal financial companies subject to the amended regulation are required to set counter party deal limits and verify counter parties’ risk hedge purpose when they trade foreign currency derivative products with corporate investors.

The amendments mandate financial investment companies and universal financial companies engaged in foreign currency services to set and implement their own guidelines on risk management of foreign currency derivative products. The guidelines need to include the followings:

1. When trading foreign currency derivative products (currency forwards, currency options, etc) with corporate investors,* financial investment companies are required to verify whether the transaction is for risk hedging.

2. Financial investment companies are required to set counter party deal limits,considering the remaining balance of foreign currency derivatives contracts
they already had with banks and other financial services companies.



*Please refer to the attached PDF for details.