{"id":2207498,"date":"2024-12-12T08:00:57","date_gmt":"2024-12-11T23:00:57","guid":{"rendered":"https:\/\/koreapro.org\/?p=2207498"},"modified":"2024-12-11T16:00:50","modified_gmt":"2024-12-11T07:00:50","slug":"bank-of-korea-announces-major-reform-to-benchmark-interest-rates-for-2025","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2024\/12\/bank-of-korea-announces-major-reform-to-benchmark-interest-rates-for-2025\/","title":{"rendered":"Bank of Korea announces major reform to benchmark interest rates for 2025"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The Bank of Korea (BOK) <\/span><a href=\"https:\/\/www.bok.or.kr\/portal\/bbs\/B0000502\/view.do?nttId=10088499&amp;searchCnd=1&amp;searchKwd=&amp;depth2=200038&amp;depth3=201263&amp;depth=201263&amp;pageUnit=10&amp;pageIndex=1&amp;programType=newsData&amp;menuNo=201265&amp;oldMenuNo=201263\"><span style=\"font-weight: 400;\">announced<\/span><\/a><span style=\"font-weight: 400;\"> on Tuesday its plans to adopt the Korea Overnight Financing Repo Rate (KOFR) as the country\u2019s 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.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">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\u2019s adoption across markets. To support the transition, the Korea Exchange will launch a central clearing system for KOFR-linked derivatives by Oct. 2025.<\/span><\/p>\n<p><b>WHY IT MATTERS<\/b><\/p>\n<p><span style=\"font-weight: 400;\">The BOK\u2019s shift to KOFR modernizes South Korea\u2019s financial benchmarks, replacing subjective CD rates with a risk-free standard based on real transactions. This aligns with global practices and is expected to strengthen financial transparency and market stability.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The move is closely tied to South Korea\u2019s inclusion in the <\/span><a href=\"https:\/\/koreapro.org\/2024\/10\/south-korea-to-join-major-bond-index-opening-doors-for-foreign-investment\/\"><span style=\"font-weight: 400;\">FTSE Russell World Government Bond Index<\/span><\/a><span style=\"font-weight: 400;\">, which will likely boost further demand for government bonds. The <\/span><a href=\"https:\/\/www.moef.go.kr\/nw\/nes\/detailNesDtaView.do?searchBbsId1=MOSFBBS_000000000028&amp;searchNttId1=MOSF_000000000070439&amp;menuNo=4010100\"><span style=\"font-weight: 400;\">expanded bond issuance<\/span><\/a><span style=\"font-weight: 400;\"> ensures sufficient collateral for KOFR transactions while enhancing market liquidity and fostering stronger connections with international investors.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Although the government aims to minimize disruptions through a phased rollout, financial institutions may still face operational challenges in updating systems and contracts. Over time, however, this transition is expected to improve monetary policy effectiveness and position South Korea as a more competitive player in global finance.<\/span><\/p>\n<div class=\"content-tags\"><a href=\"https:\/\/koreapro.org\/tag\/business-economy\/\"><span class=\"tag\">Business &amp; Economy<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"<p>The Bank of Korea (BOK) announced on Tuesday its plans to adopt the Korea Overnight Financing Repo Rate (KOFR) as the country\u2019s 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 [&hellip;]<\/p>\n","protected":false},"author":10407,"featured_media":2206623,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30],"tags":[24],"class_list":["post-2207498","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-briefings","tag-business-economy"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Bank of Korea announces major reform to benchmark interest rates for 2025 - KOREA PRO<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/koreapro.org\/2024\/12\/bank-of-korea-announces-major-reform-to-benchmark-interest-rates-for-2025\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Bank of Korea announces major reform to benchmark interest rates for 2025 - KOREA PRO\" \/>\n<meta property=\"og:description\" content=\"The Bank of Korea (BOK) announced on Tuesday its plans to adopt the Korea Overnight Financing Repo Rate (KOFR) as the country\u2019s primary benchmark interest rate starting in 2025. 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