Seoul: Bank of Korea (BOK) Governor Rhee Chang-yong on Tuesday emphasized the importance of promoting the broader adoption of the Korea Overnight Financing Repo Rate (KOFR) and developing a new benchmark rate framework to attract more global investment and bolster confidence in the domestic financial market.

According to Yonhap News Agency, Rhee made these remarks during a conference focused on the short-term financial market and the activation of KOFR. The event was jointly organized by the central bank and the Korea Institute of Finance in Seoul. The KOFR, introduced in 2021, serves as a reference rate for transactions among major financial institutions, aiming to replace the long-standing short-term benchmark, the 91-day Certificate of Deposit (CD) rate, in the derivatives market. However, the CD rate continues to be widely used by financial institutions as a benchmark.

Rhee highlighted that Korea stands on the brink of new opportunities, including potential inclusion in the World Government Bond Index (WGBI). He stressed the necessity of presenting a clear direction for evolving the benchmark rate framework to enhance investment incentives and global confidence in Korea's financial market. Furthermore, Rhee urged the development of practical solutions to accelerate the adoption of the KOFR and improve the repo market structure.

During the conference, BOK official Han Min noted that the risk-free reference rate has generally remained below the CD rate for most of the past several years. Han stated that if the same spread is applied, loan products based on the KOFR could lower customers' interest burdens compared to those based on the CD rate. Han emphasized that the KOFR reflects changes in market conditions more swiftly than the CD rate, facilitating easier anticipation of interest rate movements for customers.