IBK Industrial Bank issues variable rate bonds linked to 'Korea Risk-Free Rate'

"Domestic First Publication as a Catalyst for Market Activation"

IBK Industrial Bank announced on the 21st that it has issued Korea's first KRW 100 billion Korean Overnight Financing Rate (KOFR)-linked floating rate bonds.

IBK's KOFR-linked floating rate bonds are the first bonds issued based on KOFR since KOFR was designated as an important benchmark under the Financial Transaction Indicators Act 2 years and 8 months ago. The maturity is 6 months, and the coupon rate adds 20 basis points (1bp=0.01%) to the 1-day KOFR.

IBK has participated in the Benchmark Interest Rate and Short-term Financial Market Council and the Public-Private Working Group, hosted by the Financial Services Commission and the Bank of Korea, and as a policy bank, has promoted the issuance of these bonds to expand KOFR in the financial market.

IBK conducted internal system development and testing for several months while communicating with various market participants to promote the still unfamiliar KOFR-linked bonds and explain interest calculation and accounting methods to foster market demand. In particular, it held multiple meetings with several asset management companies, the main investors in floating rate bonds.

With this bond issuance, it is expected that the use of transaction-based interest rates will spread in the Korean financial market. Existing floating rate bonds have been issued based on the CD rate, which is quote-based, rather than the transaction-based KOFR.

An IBK official said, "The vagueness and unfamiliarity with the new interest calculation method were among the factors hindering KOFR activation," adding, "We hope the successful issuance of these KOFR-linked floating rate bonds will serve as a catalyst for the expansion of KOFR-based financial product transactions."