South Korea is seeking to allow local brokerages and insurers to engage in foreign exchange transactions starting in late February, the government said Thursday.

The finance ministry said it will revise the country's Foreign Exchange Transaction Act to remove many restrictions, which will expand the scope of the financial market and create more business opportunities.

In the past, only large commercial banks were allowed to engage in FX businesses, although non-financial companies were allowed restricted access in certain cases. This kind of practice had drawn flak for hindering growth and undermining the country's overall competitiveness.

"The aim is to enlarge and add value to the financial sector as a whole," said Choi Ji-young, head of the ministry's foreign exchange regulation division.

The move can also make it easier for people and companies to receive foreign exchange services.

In addition, FinTech companies and even other types of businesses, can in the future engage in limited foreign exchange transfer operations, if they have agreements with banks. FinTech companies are an emerging business sector that uses software to facilitate financial services.

The amount that such firms can transact will not be large initially, but it will be expanded down the road.

He said while restrictions will be lifted, the government will strengthen oversight to ensure that securities and insurance companies do not abuse the changes or engage in transactions that exposes them to excessive risks.

The official said firms that engage in foreign exchange transactions will be subject to regulations roughly on par with those implemented on banks.

In regards to banks that may lose some of their business, the ministry pointed out that a larger foreign exchange market will eventually benefit big institutions. (Yonhap)