The Financial Services Commission (FSC) unveiled key progress on the benchmark rate reform measures that have been implemented since the reform plan was announced in March this year.
There have been three working-level taskforces set up jointly with public and private sector officials to regularly review the progress of implementation and make sure to keep implementation on time as laid out by the initial schedule.
Key Progress on Benchmark Rate Reform
a) Upward adjustment of KOFR-OIS transactions target
The Financial Supervisory Service (FSS) updated its administrative guidance in June 2026 to speed up the adoption of KOFR (Korea Overnight Financing Repo Rate) in overnight index swap (OIS) transactions. The KOFR-OIS transactions target of 10 percent in the first-year period (from July 2025 to June 2026) has been raised by 15 percentage points to 25 percent for the second-year period (from July 2026 to June 2027), and by another 15 percentage points every year thereafter to meet the target of 70 percent or more in KOFR-OIS transactions by June 2030.
In the first-year period (from July 2025 to June 2026), KOFR-OIS transactions surpassed the initial goal of 10 percent to stand at 12.1 percent. As of the third quarter of 2026, KOFR-OIS transactions reached around 18.5 percent. The government and the financial sector will continue to work closely to promote KOFR- OIS transactions to meet the intended target for the second-year period.
b) New KOFR-FRN issuance target for banks
Through an administrative guidance, the FSS introduced a new KOFR-based floating rate note (FRN) issuance target for banks in June 2026. In the first-year period (from July 2026 to June 2027), banks will need to meet the KOFR-FRN issuance target of 10 percent or more and increase their KOFR-FRN issuance every year by 10 percentage points thereafter to meet the target of 50 percent or more by June 2031. For policy financial institutions (Korea Development Bank, Industrial Bank of Korea, and Export-Import Bank of Korea), the KOFR-FRN issuance target will be set at 65 percent by June 2031, a 15-percentage-point higher than commercial banks for each year. To meet this goal, in the first-year period (from July 2026 to June 2027), policy financial institutions will issue 25 percent or more of FRNs based in KOFR.
Between January and September 2026, banks (including policy financial institutions) issued about KRW20.5 trillion in KOFR-FRNs, which accounted for about 32.3 percent of all FRNs issued.
To encourage more KOFR-based transactions, the Bank of Korea (BOK) plans to increase incentives on KOFR-based transactions (OIS, FRN, etc.) when screening to select financial institutions for its open market operations in the future.
c) Introduction of new KOFR-based business loan products (Oct. 26, KDB & IBK)
To encourage a wider adoption of KOFR-based products and expand choices for consumers, the Korea Development Bank (KDB) and the Industrial Bank of Korea (IBK) will make available KOFR-based business loan products worth KRW1 trillion in total (KRW500 billion each). In particular, the KDB and the IBK plan to offer more favorable interest rate benefits for the small- and medium-sized enterprises (SMEs) and middle-market enterprises (MMEs) operating outside the Seoul metropolitan area to boost and promote their inclusive finance and regional finance efforts.
d) Phasing out KORIBOR-based loans
Since KORIBOR (Korea Inter-bank Offered Rate) is calculated similarly to the now defunct LIBOR, its usage will be phased out gradually and financial companies will in principle stop handling new loans based on KORIBOR from April 2027 (via FSS administrative guidance in early 2027). To this end, the FSS has set up a taskforce to prepare relevant guidelines and facilitate a seamless phasing out of the use of KORIBOR.
e) Strengthening the management and inspection over COFIX calculation system
With both KORIBOR-based and CD rate-based transactions expected to decline gradually in the future, it is likely to see an increasing trend of COFIX (Cost of Funds Index)-based transactions in the loan market. Thus, the KFB, which calculates and publishes COFIX on a monthly basis, has proactively stepped up efforts to strengthen the management and inspection over the calculation of COFIX.
More specifically, from June 2026, the accuracy of COFIX calculation has become newly subject to an additional review and authorization process through an independent audit division. Additionally, from the second quarter of 2026, the quarterly self-inspection criteria have been bolstered on a par with the level of scrutiny applied on a critical statutory benchmark rate in accordance with the Act on the Management of Financial Benchmarks.
In the fourth quarter of 2026, banks will self-inspect the accuracy of calculated rates and the appropriateness of internal control, which will then be subject to external inspection by the FSS.
After examining the trend of COFIX-based transactions in financial markets, the FSC may consider designating COFIX as a critical statutory benchmark rate in the future under the Act on the Management of Financial Benchmarks.
Further Plan
Financial authorities will continue to work to promote a wider adoption of KOFR in financial markets and make sure to prepare for the phasing out of new KORIBOR-based loans from April 2027 and the removal of CD rate as a critical statutory benchmark rate by the end of 2030.
In addition, financial authorities plan to jointly hold overseas investor relations in London and Hong Kong in November this year to promote a wider adoption of KOFR by global investors.
The FSC will continue to work closely with related organizations and financial sectors and make consistent efforts to boost the credibility of financial markets and push for financial benchmark rate reform.
* Please refer to the attached PDF for details.