The Bank of Korea and the Financial Services Commission are investigating issues that involve the sales of local Kimchi bonds, The Wall Street Journal reports. The authorities are focusing on the local branches of foreign banks as they are the main buyers of the bonds.
As per the regulators, some bond issuers are working with buyers to sell kimchi bonds, while the seller then takes that currency to the swap market and reaches a deal to exchange the dollars back into won. Local firms seeking to raise money can then lower their borrowing costs because of the U.S. dollar’s continued fall against the won. Kimchi bonds, which are often denominated in U.S. dollars, are used by companies to raise dollars to settle transactions with U.S. partners and for other purposes.
Click here for the story from The Wall Street Journal.