Flavio Figueiredo, Citi’s global head of foreign exchange based in New York, poses during an interview with The Korea Times at Citibank Korea headquarters in Seoul, Thursday. Korea Times photo by Shim Hyun-chul
Inclusion in WGBI to have positive impacts on overall financial market
By Yoon Ja-young
Korea’s possible inclusion in the World Government Bond Index (WGBI), operated by the London-based FTSE Russell, is expected to have various positive impacts on the overall Korean financial market beyond the local bond market, according to Flavio Figueiredo, Citi’s global head of foreign exchange (FX) based in New York.
“Since Korea was first added to the WGBI Watch List in September 2022, Korea has completed a range of capital market reforms with the aim of WGBI inclusion, such as improving measures for Korea FX market structure and opening an account with Euroclear to improve access to the nation’s government bond market. As such, we have already been seeing improved market accessibility from foreign institutional investors, which is a very encouraging change from the global market perspectives,” Figueiredo said in an interview with The Korea Times.
He is visiting Korea from Wednesday to Friday to meet Korean clients and emphasize the commitment of the Global Citi FX management. Since joining Citi in Sao Paulo in 1989, Figueiredo, who received an MBA from London Business School, has worked across a variety of areas at the firm, including private equity, derivatives and FX.
“It is expected to benefit (the) Korean bond market since it is expected to spark inflows of between $50 billion to $60 billion into the country from passive investors. Spread over roughly 15 months, this will likely trigger a fall in (Korean treasury bond) yields and, hence, a fall in the government’s funding cost. Heavy inflows are likely to stabilize the Korean won as well, but gains will depend on the amount of hedged inflows and the offsetting outflows. Thus, we see the inclusion will become an important point which will boost the Korea financial market to be more integrated into the global market with active flows.”
Figueiredo said Citi is differentiating from other international banks and local competitors, to be relevant to clients in Asia and particularly in Korea.
“Citi’s mission is to serve as a trusted partner to our clients by responsibly providing financial services that enable growth and economic progress. We live in an increasingly complex world where business and geopolitics are forging an entirely new dynamic, and consumers now expect financial services to be a seamless part of their digital lives.”
He said Citi is uniquely positioned for this moment.
“We have more than 200 years of experience helping our clients meet the world’s toughest challenges and embrace its greatest opportunities. Through our vast global network and our on-the-ground expertise, we can connect the dots, anticipate change and understand the needs of our clients and customers in ways that other banks simply cannot. We have an unmatched global footprint and understanding of local markets that our clients can leverage,” he said.
FX business model
Equipped with a worldwide network and a broad range of FX products, Citi is a major player in the FX market that provides liquidity to institutional clients in Korea. With all these capabilities, Citi focuses on clients’ needs and requirements and offers tailored solutions, according to Figueiredo.
“For strategies, Citi has risk management solutions and advisory services where we can help clients hedge against currency fluctuation and market volatility by providing insights and market analysis. Citi also provides integrated solutions with cash management services and digital FX solutions to adapt to rapidly changing market dynamics.”
He stressed that Citi is investing continuously in tech stack to support the digital priorities of clients.
“This year, we are also pleased to extend our rollout of Velocity 3.0, our award-winning single dealer FX operating system that delivers a rich user experience across the FX trade lifecycle, into the local markets. This release brings together our industry-leading platforms CitiFX Pulse, Citi Velocity Trading, Citi Velocity Research and CitiFX Click, under one consolidated access point and user experience,” he said, stressing that Velocity 3.0 will best serve clients who are increasingly looking to optimize how and where they source liquidity from.
Flavio Figueiredo, Citi’s global head of foreign exchange based in New York, poses during an interview with The Korea Times at Citibank Korea headquarters in Seoul, Thursday. Korea Times photo by Shim Hyun-chul
Corporates adjusting business models
He pointed out that Asian corporations are adjusting their business models for a much more complex, fast-paced, digital global economy.
“Citi is focused on being the partner of choice for digital commerce and helping our clients navigate evolving trends through our payments, liquidity and cash management services. We have the ability to connect and do business in 95 markets using local banking licenses and our on-the-ground expertise. Citi is at the forefront of providing advanced digital platforms and tools that enable real-time trading, automated transactions and data analytics, facilitating more efficient operations for Asian corporates.”
He said Asian corporations are increasingly digital, with many of them leading the technology development narrative globally.
“Resultantly, the use and adoption of FX technology is commonplace for corporates. Treasury professionals recognize the value that technology brings to treasury management,” he said.
Embedded finance is also another area that is driving the adoption of FX technology, according to Figueiredo.
“For example, online sales distribution channels (e-commerce sales) are increasingly implementing FX pricing solutions and multi-currency pricing to drive sales and elevate front-end user experiences. Citi (is) pleased to partner (with) some of the biggest e-commerce companies globally in the design and deployment of these solutions, leveraging our robust FX API and risk management capabilities,” he said, adding that Citi has won multiple awards for its industry leadership in FX technology.
Citi spotlighted amid RFI registration
When the Korean government introduced the registered foreign institution (RFI) certification to allow foreign banks to conduct FX trading in Korea, Citi played an active role in coordinating the policy with the Korean government, as well as offshore institutional investors.
“We have played a key role as one of (the) very few major banks (that) advised the government to design the FX policy change to be in line with global standards. We always try to maintain a strong relationship with the finance ministry (by) participating in key meetings where the officials seek advice in areas where Citi can offer global insights. Extensive networks with global clients are another pillar of strength of Citi,” he said.
He said Citi has been receiving many inquiries from key offshore clients on policy changes, not limited to the FX market but extended to the bond market which is also reformed in a way that foreign investors can trade Korean treasury bonds without major hurdles.
“With the Euroclear-(Korea Securities Depository) link introduced, foreign investors don’t have to open Korean won accounts in onshore banks, which will lead to more demands (for) local bonds. The clients seem to be very keen on more actively trading Korean won FX and bonds going forward thanks to the policy change. Onboarding, account set-up and other operational hurdles will be handled in a professional manner by Citi. We believe all these policy changes in the FX and bond market will eventually make the Korean financial market bigger,” he said.
Flavio Figueiredo, Citi’s global head of foreign exchange based in New York, poses during an interview with The Korea Times at Citibank Korea headquarters in Seoul, Thursday. Korea Times photo by Shim Hyun-chul
FX market improvement
Figueiredo said the improvement measures for the Korea FX market will bring major changes in the medium to long term.
“The Korean won has long been a non-deliverable currency in the offshore market, even after the government decided to move on to a free-floating FX policy back in 1997,” he said. “Market transaction volumes have increased meaningfully enough to change the whole picture of the FX market in a way that offshore participants can use deliverable currency. We believe major changes are expected to happen due to the market reform.”
He said offshore institutional investors and authorized offshore banks are now able to freely trade the deliverable Korean won, and hence, they can access onshore market liquidity, which is far more liquid in terms of transaction volumes compared with the non-deliverable forward market.
“Also, market participants are now able to trade deliverable Korean won even at night time till 2 a.m. local time, which will make it easier for European investors to convert currency to invest in Korean assets,” he said. “We expect the Korean government to eventually extend the market trading hours to be 24 hours so that the market can cover all segments of investors. And we believe that will lead to more confidence and credibility in Korean financial markets from global institutional investors.”
Flavio Figueiredo, Citi’s global head of foreign exchange based in New York, poses during an interview with The Korea Times at Citibank Korea headquarters in Seoul, Thursday. Korea Times photo by Shim Hyun-chul
