The new system ties benchmarks to transaction-based rates, enhancing stability and aligning with global trends
An electronic display at the Korea Exchange that highlights the KOSPI and KOSDAQ stock indices, July 25, 2024 | Image: Korea Pro
The Bank of Korea (BOK) announced on Tuesday its plans to adopt the Korea Overnight Financing Repo Rate (KOFR) as the country’s primary benchmark interest rate starting in 2025. KOFR, a risk-free rate based on real transactions, will gradually replace the credit-risk-heavy certificate of deposit (CD) rate in derivatives and bond markets.
From mid-2025, KOFR will account for at least 10% of interest rate swap transactions, with a target of 50% by 2030. Policy banks and lenders will also issue floating-rate bonds tied to KOFR, ensuring the benchmark’s adoption across markets. To support the transition, the Korea Exchange will launch a central clearing system for KOFR-linked derivatives by Oct. 2025.
The Bank of Korea (BOK) announced on Tuesday its plans to adopt the Korea Overnight Financing Repo Rate (KOFR) as the country’s primary benchmark interest rate starting in 2025. KOFR, a risk-free rate based on real transactions, will gradually replace the credit-risk-heavy certificate of deposit (CD) rate in derivatives and bond markets.
From mid-2025, KOFR will account for at least 10% of interest rate swap transactions, with a target of 50% by 2030. Policy banks and lenders will also issue floating-rate bonds tied to KOFR, ensuring the benchmark’s adoption across markets. To support the transition, the Korea Exchange will launch a central clearing system for KOFR-linked derivatives by Oct. 2025.
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