The latest news about benchmark lending rate is comes from the government of South Korea, the plan to implement and adopting new benchmark lending rate on money market segments. This plans is responding current growing demands on short term lending rates rigging of the certificate of Deposit rate, current benchmark lending rate by banking and brokerage firms.
Korean Financial Services Commission inform that the new benchmark lending rate will developed soon with the name of COFIX, stand for Cost of Funding Index. The COFIX will be weekly quote basis with the determination that comes from the average of the rates that submitted by the local banks (nine locals banks to contribute).
Based on their plans, the first quote of COFIX will be available and released by the first weeks of this November by Korea Federation of Banks, FSC said.
This first quote is expecting to inform various rate of lending including retail and corporate rate and also the credit that near to maturity date will be added too.
The FSC said it would gradually induce market players to shift to the COFIX for its reference rate, but the CD rate will be held valid for the time being since a bulk of financial products in South Korea, including mortgage loans and interest swaps, are tied to it.
The central bank's data show that loans linked to CD rates account for 30 percent of the overall loans extended by banks as of end-March, worth 323.8 trillion won. A total of 154.3 trillion won, or 14.3 percent worth of debts are tied to the COFIX.
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