SEOUL (Reuters) - South Korea plans to lower eventually the ceiling on currency derivatives for branches of foreign banks, bringing it at par with that imposed on domestic banks, a senior finance ministry official said on Tuesday.
Treasury bond futures turned lower after modest gains. The won came under pressure as additional steps could dampen fund inflows, although later cutting losses after China set the yuan's daily mid-point higher.
The news of a plan came just a week after South Korea, wary of the won's much bigger volatility than its regional peers, unveiled steps to regulate currency derivatives trading by domestic and foreign banks.
On June 13, the authorities said they were setting a cap of 50 percent of equity capital for currency derivatives positions of domestic banks and a 250 percent ceiling for foreign bank branches to account for their typically much lower capital.
However, Kim Ik-joo, head of the finance ministry's international finance bureau, said the authorities planned to eventually set the same 50 percent ceiling for both domestic and foreign institutions.
The government's basic stance is that we should not discriminate against domestic banks in relation to foreign bank branches, Kim told Reuters, confirming an earlier report by a local online news service.
But he said no decision has been made on details such as timing.
Another senior official, who asked not to be named because he was not in direct charge of the issue, said any such adjustment would be implemented over the medium-to-long term.
The three-month treasury bond futures September contract was down 0.11 point at 110.10 at 0143 GMT, turning down from an early rise to as high as 110.31, as foreign investors sold a net 6,881 contracts.
The won was down 0.8 percent at 1,181.0 per dollar, just off a session low of 1,189.0.
(Writing by Yoo Choonsik; Editing by Tomasz Janowski)