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.