South Korea's foreign currency liquidity measures unveiled on Thursday may push local banks' costs higher, but any increase will be "marginal", a top financial regulator said.

Below is an overview of existing capital control measures in Asian countries:

CHINA:

-- On Oct. 24, 2009, China resumed issuing quotas under its scheme to allow domestic investors to put money into overseas markets after a 17-month halt. EFund Management Co has been issued a $1 billion quota by the State Administration of Foreign Exchange (SAFE), China's foreign exchange regulator, under the country's Qualified Domestic Institutional Investor (QDII) scheme.

-- No entities outside China are allowed to participate in trading of the CNY.

-- Corporates registered in China cannot buy or sell foreign currency offshore.

-- Any resident borrowing from abroad is subject to stringent controls. All such loans must be approved by and registered with SAFE.

-- Only licensed banks are allowed to take CNY deposits onshore. The ratio of current assets to current liabilities must be greater than 25 percent for both foreign currency and local currency businesses, on a daily basis. The loan/ deposit ratio cannot be higher than 75 percent, while foreign banks got some buffer period to cut down this ratio. Also, for foreign currency businesses, the ratio of domestic customer deposits to assets in China (with both values denominated in foreign currency) must be less than 70 percent, on a monthly basis.

INDIA:

-- Onshore FX contracts including forwards and derivatives, to the extent permitted, can be entered into only by resident entities. The exception is Foreign Institutional Investors (FIIs), which are given limited access to forward contracts.

-- For FX options only Authorized Dealers are allowed to offer foreign currency rupee options.

-- With cross currency swaps not involving rupee can be entered into only by resident entities having FCY borrowings.

-- Except for FII, non-residents are not allowed access into Government bonds.

-- Except for Non-Resident Indians (NRI), non-residents are not allowed access to rupee deposits.

-- Non-resident Indians may borrow locally, however the money may not be remitted overseas.

INDONESIA:

-- Without supporting documents, onshore banks have been prohibited from lending IDR offshore since January 2001. Offshore accounts are also not allowed to be in overdraft.

-- Prohibits IDR transfer to offshore entities, unless supported by underlying transactions, which are in turn supported by investment activities in Indonesia.

Also the tighter restrictions have been placed on the purchase of foreign currency against IDR by onshore participants which include following controls:

-- Purchases of foreign currency against IDR must not be for speculative purposes.

-- Clients are required to declare that they will not purchase more than an equivalent $100,000 of foreign currency in Indonesia.

-- Underlying documentation is required for foreign currency purchases exceeding $100,000.

MALYASIA:

-- For cross-border inter-company lending, a resident company is free to obtain any amount in foreign currency from non-residents companies. Resident company borrowing from non-resident banking institutions is however still subject to ceiling of MYR 100 million (trade financing capped at MYR 5 million equivalent). With effect May 2008, a resident company is allowed to borrow in MYR, from its non-resident non-bank parent company to finance activities in the real sector in Malaysia. MYR credit facilities from non-resident banking institutions are still not permissible. A resident company or individual is free to lend in MYR of any amount to non-resident non-bank companies or individuals to finance activities in the real sector in Malaysia (previously, only up to MYR 10,000); and a licensed onshore bank is free to lend in MYR of any amount to non-resident non-bank companies or individuals to finance activities in the real sector in Malaysia.

-- Non-Resident External Accounts with onshore financial institutions are permitted. A Non-Resident may make MYR cash withdrawals of any amount, with the use and sources of funds subject to the limitations prescribed by the Central Bank. MYR funds in External Accounts may be converted into foreign currency and repatriated or used in Malaysia for permitted purposes.

PHILIPPINES:

-- The purchase of foreign exchange for outward investments is allowed up to a maximum of $30 million without prior approval. Proof of investment outside of the Philippines must be presented to an Authorized Agent Banks (AAB). A letter of undertaking stating that all proceeds will be sold back to the banking system is also necessary.

-- Non-Residents are not allowed to access the onshore short -term money market.

-- Non-Residents are not allowed to borrow PHP from onshore banks.

-- Non-residents are not allowed to maintain PHP deposits onshore unless the deposit is funded by an inward remittance of foreign exchange (converted through an onshore bank).

SOUTH KOREA:

-- Banks are required to hold at least 2 percent of their total foreign assets in foreign treasury bonds rated A or above or set aside a certain amount of safe foreign assets, such as treasuries, in proportion to the value of liabilities maturing within a year.

-- Both local banks and branches of foreign banks are not allowed to trade forex forwards worth more than 125 percent of the value of exports to avoid excessive currency-hedging.

-- Banks should classify foreign assets depending on how fast banks are able to cash them in, in order to come up with a more realistic liquidity ratio. Under existing rules, all foreign-currency assets are assumed to be retrievable at any time, including forex lending for working capital and foreign currency securities, such as corporate bonds.

-- Banks should raise the ratio of their long-term forex funding to long-term forex lending to 90 percent from the current 80 percent. The financial watchdog will encourage banks to enhance the ratio to more than 100 percent by the end of the first half in 2010.

SRI LANKA:

-- Foreigners are permitted to own up to 10 percent of outstanding stock of government bonds.

-- Sri Lanka's central bank on May 28, 2009, removed restrictions imposed on forward sales and purchase of foreign exchange to allow more flexibility.

TAIWAN:

-- On Nov. 10, 2009, Taiwan imposed capital controls, banning foreign funds from investing in time deposits in a move aimed at deterring bets on currency appreciation. Over T$4.63 trillion of foreign funds flowed into Taiwan up to September this year, with about 0.21 percent of that being placed in time deposits.

THAILAND:

-- Introduced measures in late 2003 to curb speculation pressure on THB, which included a ban on non-residents lending more than USD50 million onshore, and allowing current and savings accounts for settlement purposes only with a cap at THB300 million per non-resident and with no interest to be paid on deposits of less than 6-months tenor.

-- In mid-December 2007 a sweeping 30 percent Unremunerated Reserve Requirement (URR) on all new inflows was imposed to curb capital inflows which were putting upward pressure on the currency.

VIETNAM:

-- Only residents (central bank, commercial banks, economic entities and individuals) are allowed to transact FX forwards and options.

-- Non-resident offshore companies are allowed to open foreign currency accounts, but not VND accounts.

(Writing by Carl Bagh, Bangalore Editorial Reference Unit)

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