S.Korea FX measures may raise banks' costs -regulator

SEOUL, Nov 20 (Reuters) - 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.

The steps, which will take effect in the new year, include calling on banks to hold a certain amount of high-rated foreign treasury bonds and a reduction in forwards trading, with the aim at tightening control over foreign exchange liquidity. [ID:SEO238632]

Kim Jong-chang, governor of the regulatory Financial Supervisory Service, also said late on Thursday that the measures would not cover carry-trade issues, but were aimed at improving the soundness of financial companies' foreign assets.

"The measures are not about control of foreign capital flows," he told a meeting with foreign media reporters under embargo till early Friday.

"We are discussing if there are any actions we can take to address the issue," he said, in reference to the dollar/won carry-trade.

Concerns over economic exposure to capital movements have returned as emerging economies move to raise interest rates while some major economies, especially the United States, keep theirs low.

That means foreign investors can borrow cheaply in U.S. dollars to raise funds to buy Korean assets. Equally, Korean banks can borrow cheap funds abroad.

(Reporting by Kim Yeon-hee; Editing by Jonathan Hopfner)