From the 3rd quarter, KFTC announced
Korea’s risk-free index rate (RFR) was chosen as the interest rate for government bonds and currency-stable securities redemption conditional bonds (RP).
The risk-free indicator rate takes into account the temporal value of money, and refers to the theoretical interest rate that can be expected from risk-free investment.
According to the Financial Services Commission and the Bank of Korea on the 26th, as a result of a market participant group (MPG) vote consisting of 26 financial institutions, the RP rate of government bonds and Tongan Securities, which received a total of 22 votes, was finally selected as RFR.
The RFR calculation and disclosure will be made by the Korea Securities Depository, which calculates the current RP rate, and will be disclosed in the third quarter of this year as early as possible.
In other countries, it is usually calculated and disclosed by the central bank, but in Korea, the depository, a specialized institution, decided to entrust it.
RFR can be used in place of the CD rate in international derivative transactions.
Dividing the size of CD-linked financial contracts by type, as of the third quarter of last year, derivatives were KRW 6810 trillion, loans were KRW 200 trillion, and bonds were KRW 28 trillion.
The Financial Services Commission and the BOK plan to prepare measures to revitalize such as promoting the listing of RFR futures on the exchange in the second half of this year.
In the third quarter, RFR is designated as an important indicator in the indicator method, and plans to improve mid- to long-term systems, such as enhancing transaction transparency, will be prepared.
In the wake of the 2012 Ribo (LIBOR/London interbank interest rate) manipulation, major countries have promoted the development of RFR, which is calculated based on actual transactions rather than quotes.
Since the calculation of the Ribo rate will be completely stopped from January of next year, it is necessary to convert the reference rate of the existing and new contracts to an alternative rate.
Gyu-sang Doh, vice chairman of the Financial Services Commission, said, “The financial industry needs to respond with tense feelings ahead of the suspension of the calculation of the Libo interest rate.”
/yunhap news
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