The National Pension Service (NPS) has conducted an interim check on direct foreign exchange transactions with banks based in other countries it approved in May.
Members of NPS board of directors were recently briefed on the background and progress of foreign exchange transactions with foreign-based banks as well as expected effects and risk management measures. They also discussed ways to deal with problems that may arise from the transactions, according to sources.
The sources said the participants at the meeting recommended NPS should expand its foreign exchange management team and dispatch employees who are able to deal with potential risks to domestic and overseas offices. The specific risks discussed in the meeting were not known.
The meeting was held almost two months after NPS decided to give opportunities to handle foreign exchange transactions needed for its overseas investment to foreign financial institutions with no branches in Korea. For that purpose, it partially changed the rules on foreign exchange business institutions.
This move was in line with its plan to increase exposure to overseas investments. Previously, NPS had to work only with domestic financial institutions and domestic branches of foreign financial institutions when it transacted foreign exchange.
NPS reportedly revised the rule, judging that it can benefit from direct foreign exchange transactions with foreign financial institutions. Keeping the fees lower than when it transacts with domestic banks is cited as one of the benefits.
NPS had about 726 trillion won ($607.9 billion) in assets under management as of the end of April, of which overseas investment accounted for about 35.2%, or 255.4 trillion won. It allocated 141 trillion won to global stocks, while its investments in foreign alternatives and global bonds stood at 63 trillion won and 34 trillion won respectively. (Reporting by Heeyeon Han)