KOFR Benchmark Rate Reform Plan

Press Releases

FSC Unveils Benchmark Rate Reform Plans to Ensure Consistent and Swift Transitions Mar 30, 2026
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The Financial Services Commission announced benchmark rate reform plans intended to boost confidence in financial markets at the meeting held on March 30 with officials from related financial authorities and industry groups. FSC Vice Chairman Kwon Dae-young presided over the meeting and laid out the following three key principles for benchmark rate reform—(a) swiftly improving confidence on benchmark rates, (b) minimizing potential impact on the market, and (c) strengthening protections for financial consumers.

Key Details of Benchmark Rate Reform

a) Promoting KOFR-based transactions in financial markets

With the establishment of a central clearing system for KOFR-based overnight index swap (OIS) transactions, the government plans to speed up the adoption of KOFR in the market more quickly than previously planned. To this end, the previously planned KOFR-OIS target of 50 percent by June 2030 (via 10%p increase every year for five years) will be increased to 70 percent by June 2030 (via 15%p increase every year). For the period running from July 2026 until June 2027 (the second year), financial companies will need to meet the KOFR-OIS target of 25 percent (10% in the first year plus 15%p).

There will be a new KOFR-FRN (Floating Rate Note) transactions target established (via administrative guidance from the Financial Supervisory Service in June 2026) to promote the adoption of KOFR in the FRN market. In the first year (from July 2026 to June 2027), banks will need to meet the KOFR-FRN target of 10 percent and increase their KOFR-FRN transactions every year by 10%p thereafter to meet the target of 50 percent by June 2031. For policy financial institutions (Korea Development Bank, Industrial Bank of Korea, and Export-Import Bank of Korea), the KOFR-FRN target will be set at 65 percent by June 2031, a 15%p higher than commercial banks. To meet this goal, in the first year (from July 2026 to June 2027), policy financial institutions will issue 25 percent or more of FRNs based in KOFR.

To encourage a wider adopt of KOFR and expand choices for consumers, KOFR-based loan products will also be introduced in the market. The Korea Development Bank (KDB) and the Industrial Bank of Korea (IBK) plan to introduce KOFR-based loan products worth KRW1 trillion (KRW500 billion each) for regional businesses, small- and medium-sized enterprises, and small merchants.

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 2026.

b) Removing CD rate as a critical statutory benchmark rate at the end of 2030

Considering its less frequent usage, CD rate will be removed from the status of a critical statutory benchmark rate under the Act on the Management of Financial Benchmarks at the end of 2030 (via FSC’s approval). The announcement of CD rate’s specific removal period is to clearly demonstrate the government’s willingness to make a transition in benchmark rate from CD rate to KOFR.

With the CD rate scheduled to be removed as a critical benchmark rate, financial companies need to make voluntary efforts to make transitions away from CD rate-based transactions. In this regard, each financial industry association will disseminate and provide relevant information to financial companies to ensure a seamless transition away from CD rate. In addition, the Bank of Korea (BOK) and related organizations plan to carry out overseas investors’ relations activities in the second half of this year to promote foreign investors to choose KOFR-based OIS transactions, instead of CD rate.

c) Gradually reducing KORIBOR-based transactions

Since KORIBOR is calculated similarly to the now defunct LIBOR and it is being used as a reference lending rate only by a few banks, its usage will be discouraged gradually. To this end, banks will in principle stop handling new loans based on KORIBOR from April 2027 (via H2 2026 administrative guidance from the FSS).

Financial consumers using KORIBOR-based loans can continue to use KORIBOR as a benchmark rate during their loan contracts. Once their loans reach maturity after April 2027, consumers wishing to renew or extend the loan period can enter into a loan contract based on an alternative benchmark rate.

d) 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-based transactions in the loan market. Thus, there will be enhanced management and inspection over the calculation of COFIX.

In this regard, the Korea Federation of Banks (KFB), which calculates and publishes COFIX on a monthly basis, will bolster internal inspection on the calculation and authorization of COFIX on a par with level of scrutiny applied on a critical statutory benchmark rate. Moreover, 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 government may in the future consider designating COFIX as a critical statutory benchmark rate under the Act on the Management of Financial Benchmarks.

• Please refer to the attached PDF for details.

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