Press Releases - Financial Services Commission

Press Releases

Period: start
~
end

1month 3month Reset

Requirement

Jun 08, 2023

Authorities Hold 1st Meeting on Benchmark Rate and Short-term Money Market

The Financial Services Commission held a meeting with the Bank of Korea, the Financial Supervisory Service and relevant industry groups and institutions to monitor how domestic financial institutions are preparing for a transition away from LIBOR (London interbank offered rate) and discuss issues surrounding the operation of domestic financial benchmark rates. In coordination with relevant institutions and financial companies, the government has been working to make a transition away from LIBOR, responding to the European Unions Benchmark Regulation (BMR) compliance and participating in the global benchmark rate reform efforts. The following is an overview of these efforts so far. First, all financial contracts based on non-USD LIBOR, which ceased to be published in 2022, were successfully converted, and financial contracts based on LIBOR, which will be discontinued from July 2023, are being converted to an alternative rate such as secured overnight financing rate (SOFR). As of the end of May 2023, about 95.3 percent of domestic financial institutions contracts have made this transition. Second, the government enacted the Act on the Management of Financial Benchmarks, which became effective in November 2020 and reflects international standards on benchmark rate reform, to strengthen credibility of domestic benchmark rates. In order to ensure a seamless utilization of domestic benchmark rates (Korea overnight financing repo rate and certificate of deposit rate) in the European Union, authorities have been working with EU counterparts to get an approval for congruity. Third, in February 2021, authorities selected the Korea Overnight Financing Repo Rate (KOFR) as Koreas new risk-free reference rate (RFR) and designated it as a critical benchmark rate under the Act on the Management of Financial Benchmarks. The KOFR is being published by the Korea Securities Depository (KSD) since November 2021. Currently, three-month KOFR futures and exchange traded funds (ETFs) have b
Attachment 1
Dec 27, 2021

Authorities to Ensure Seamless Transition from LIBOR and Promote KOFR Market

With the London interbank offered rate (LIBOR) expected to be no longer available in major markets starting with non-USD LIBOR from 2022, the FSC announced that the authorities along with the financial industry have taken appropriate steps to ensure a seamless transition to alternative rates. The transition away from LIBOR-based contracts to alternative rates has been taking place at financial institutions and the authorities have already announced the introduction of the Korea overnight financing repo rate (KOFR)as a new risk-free reference rate (RFR) which began to be published from November 25 this year. Major economies including the US, the UK, Japan and EU have also been taking steps in preparation for the discontinuation of LIBOR by developing and promoting their own RFRs according to the recommendations made by the Financial Stability Board. The FSC and the FSS along with the Korea Federation of Banks have been operating a taskforce in this regard to closely monitor and supervise the transition by financial institutions according to the schedule. The authorities will continue to properly respond to the cessation of LIBOR and shifting trends in global reference rates while working to actively promote the KOFR market. * Please refer to the attached PDF for details.
Attachment 1
Feb 26, 2021

FSC Announces Korea's Risk-free Reference Rate

Vice Chairman Doh Kyu-sang held the 35th financial risk assessment meeting and 3rd taskforce meeting on benchmark interest rate reform via teleconference on February 26. At the meeting, Vice Chairman Doh announced the authorities selection of the overnight repo rate of government bonds and monetary stabilization bonds as Koreas new risk-free reference rate (RFR). The following is a summary of Vice Chairman Dohs remarks. (Transition from LIBOR) The uncertainty surrounding the continuing availability of LIBOR beyond the end of 2021 requires financial institutions and businesses to be thoroughly prepared. In this regard, financial institutions and businesses are recommended to refrain from making new contracts based on LIBOR after the end of this year to minimize risks. For the current LIBOR-based contracts with maturities extending beyond the end of this year, fallback provisions should be added prior to the third quarter of this year. The financial authorities along with the relevant institutions have been operating a taskforce to prepare for the discontinuation of LIBOR under the auspices of the working group on reforming benchmark interest rate. The authorities will work for a seamless and systematic transition from LIBOR, ensure that financial institutions have adequate consumer protection measures in place and regularly monitor the financial institutions LIBOR exposures, response plans, etc. (Selection of RFR) The working group on benchmark interest rate reform has completed the selection of a RFR after a year and eight months of the selection process. After a series of discussions and votes by a market participants group,the working group has selected the overnight repo rate of government bonds and monetary stabilization bonds as the RFR. The repo markets abundant liquidity and its expandable use in derivatives markets were the main reasons for selection. After additional discussions on the calculation method of RFR, the Korea Securities Depository which current
Attachment 1