SEOUL, 10th December, 2024 (WAM) -- The Bank of Korea (BOK) said Tuesday it will actively use a newly introduced reference rate in transactions with major financial institutions starting next year in an effort to align with global trends and boost efficiency, reported Yonhap News Agency.
In 2021, the country's financial regulator unveiled the Korea Overnight Financing Repo Rate (KOFR) to replace the decades-old short-term benchmark rate, the 91-day Certificate of Deposit (CD) rate, in the derivatives market, but financial institutions are still widely adopting the CD rate as the benchmark rate.
In a move to promote its adoption, the BOK and 29 major financial institutions have agreed to have at least 10 percent of interest rate swap transactions be based on the new rate system starting 2025, according to the BOK.
The bank set a goal of boosting the share in phases to over 50 percent by 2030.
Under the plan, the annual issuance of the KOFR-based floating rate notes is projected to reach 3 trillion won (US$2.1 billion) next year and grow further, up to 5 trillion won, in the longer term, the BOK added.