Financial Supervisory Service Announces 2024 OTC Derivatives Transaction Status of Financial Companies
"Surpassing 1,814.6 Quadrillion Won in 2021 to Over 2,600 Quadrillion Won in 2024"
The volume of over-the-counter (OTC) derivatives transactions by financial companies surpassed 2,600 quadrillion won last year, marking an all-time high.
According to the "2024 Status of OTC Derivatives Transactions by Financial Companies" released by the Financial Supervisory Service on June 10, the total volume of OTC derivatives transactions by domestic financial companies in 2023 reached 2,646.1 quadrillion won. This represents an increase of 175.8 trillion won (7.1%) compared to the previous year, setting a new record high. The volume of OTC derivatives transactions has steadily increased, from 1,814.6 quadrillion won in 2021, to 2,454.8 quadrillion won in 2022, and 2,470.4 quadrillion won in 2023.
The main reasons for the increase in transaction volume were the growth in currency forward and interest rate swap transactions. The volume of currency forward transactions reached 1,816.5 quadrillion won last year, up 6% from the previous year. This was due to an increase in external trade volume and greater exchange rate volatility, which led to higher demand for foreign currency hedging. In addition, interest rate swap transactions also rose by 9.4% to 642.4 trillion won. Following the policy rate hikes in 2022, the prevailing high interest rate environment and the expanded possibility of rate cuts last year led to an increase in hedging transactions.
As of last year, the outstanding balance of OTC derivatives transactions by financial companies stood at 1,434.8 quadrillion won, an increase of 105.7 trillion won from the previous year. By product, interest rate-related transactions accounted for the largest share at 883.7 trillion won (61.6%). By financial sector, banks accounted for 1,101.4 trillion won (76.8%).
By underlying asset, currency-related transactions amounted to 1,932.8 quadrillion won, accounting for 73.0% of the total, making it the largest category. This was a 5.2% increase from the previous year. The outstanding balance of currency-related transactions also rose by 15.8% year-on-year to 527.5 trillion won. By transaction type, currency forward transactions accounted for 1,816.5 quadrillion won, representing the vast majority (94.0%) of all currency-related transactions.
The volume of interest rate-related OTC derivatives transactions was 655.8 trillion won, up 9.4% from the previous year. The outstanding balance increased by 3.8% to 883.7 trillion won. By type, interest rate swap transactions accounted for 642.4 trillion won, representing 97.9% of all interest rate-related transactions.
The volume of equity-related OTC derivatives transactions reached 46.9 trillion won, a 78.2% increase from the previous year. The outstanding balance rose by 5.1% to 11.0 trillion won. By transaction type, equity swap transactions accounted for 42.6 trillion won, representing the largest share at 90.9% of all equity-related transactions.
By sector, banks accounted for the largest share of OTC derivatives transactions, with 2,035.5 quadrillion won, or 76.9% of the total. Most of the OTC derivatives transactions by banks were in currency forwards (1,549.3 quadrillion won) and interest rate swaps (409.6 trillion won). Securities firms followed with 447.3 trillion won, accounting for 16.9% of the total, while trusts accounted for 119.6 trillion won, or 4.5%.
In terms of outstanding balance, banks had the largest amount at 1,101.4 trillion won, followed by securities firms (272.6 trillion won) and insurance companies (31.8 trillion won).
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