The Bank of Korea and the Financial Services Commission have published a final benchmark rate reform plan that sets new targets to expand the use of the Korea Overnight Financing Rate (KOFR) across derivatives, floating-rate notes and loans, while setting a transition path away from CD rate and KORIBOR benchmarks and strengthening oversight of the COFIX framework. To accelerate KOFR uptake, the plan lifts the KOFR-based overnight index swap (KOFR-OIS) transaction target from a 10 percentage point annual increase to a 15 percentage point annual increase, raising the June 2030 target from 50% to 70%, building on infrastructure such as the launch of central clearing for KOFR-OIS in October 2025. Financial institutions are expected to ensure KOFR-OIS transactions account for at least 25% of their total interest rate swaps for July 2026 to June 2027. New administrative guidance will also introduce KOFR-based floating-rate note issuance targets for banks, starting at 10% of total FRNs from July 2026 and rising by 10 percentage points annually to 50% by June 2031, with policy banks (Korea Development Bank, Industrial Bank of Korea, Export-Import Bank of Korea) held to a higher 65% target by 2031 and a first-year expectation of at least 25%. KOFR-indexed loan products are planned for launch by Korea Development Bank and Industrial Bank of Korea in the second half of 2026, with an expected total volume of KRW 1 trillion (KRW 500 billion each), and the Bank of Korea will increase the weighting of KOFR-based activity in its 2026 selection process for open market operations counterparties. The CD rate is slated to be de-designated as a “Critical Benchmark” by end-2030, pending a Financial Services Commission resolution, with market participants encouraged to voluntarily reduce CD-based transactions and financial associations expected to provide implementation guidance. Authorities also plan joint overseas investor relations sessions in the second half of 2026 to encourage foreign investors to use KOFR-based swaps, while noting the CD rate will continue to be published for the time being even after de-designation. For KORIBOR, new KORIBOR-based bank lending will, in principle, be suspended from April 2027 following Financial Supervisory Service administrative guidance expected in the second half of 2026, while existing contracts can run to maturity and renewals after April 2027 are expected to switch to alternative benchmarks such as COFIX or bank bond rates. Anticipating greater reliance on COFIX, the Korea Federation of Banks will enhance internal review and approval controls to a level equivalent to critical benchmarks, banks will perform self-inspections subject to focused Financial Supervisory Service checks, and a future designation of COFIX as a “Critical Benchmark” will be considered depending on its market weight, subject to a Financial Services Commission resolution.
Bank of Korea2026-03-30
Bank of Korea and Financial Services Commission finalize benchmark rate reform plan to accelerate KOFR adoption and end CD rate critical benchmark status by 2030
The Bank of Korea and the Financial Services Commission have finalised a benchmark rate reform plan to expand use of the Korea Overnight Financing Rate across derivatives, floating-rate notes and loans, while phasing out reliance on the CD rate and KORIBOR and strengthening oversight of the COFIX framework. The plan raises KOFR-based overnight index swap and floating-rate note issuance targets through 2031, introduces KOFR-indexed loan products, and adjusts open market operations to favour KOFR-linked activity. CD is expected to be de-designated as a “Critical Benchmark” by end-2030, new KORIBOR-based lending will cease from April 2027, and COFIX governance and potential future critical benchmark designation will be enhanced.