KOFR swap trading share exceeds target… benchmark rate reform on track

2026.10.26. The Fair Economy — The benchmark interest rate reform, jointly driven by the public and private sectors with the Financial Services Commission, the Bank of Korea, the Financial Supervisory Service, the Korea Securities Depository, and the Korea Federation of Banks, is delivering results that exceed its targets. The share of transactions based on the risk-free benchmark rate (KOFR, Korea Overnight Financing Repo Rate) in the interest rate swap market reached 12.1% in the first year, surpassing the 10% target. The bank sector's issuance share of KOFR floating-rate notes (FRNs) also exceeded the 10% goal, reaching 32.3% through the third quarter of this year.

Financial authorities announced this progress on the 26th.

The Financial Supervisory Service raised the interest rate swap KOFR trading target from 10% in the first year to 25% in the second year through administrative guidance issued in June. The Bank of Korea increased the weight given to KOFR trading performance when selecting counterparties for its open market operations. The Korea Securities Depository has been publishing 30-day, 90-day and 180-day average KOFR rates since August. The Korea Federation of Banks completed revisions to its best practice standards for loan interest rates in June.

The Financial Services Commission convened the "Benchmark Rate and Short-Term Financial Market Council" with the Bank of Korea, the FINANCIAL SUPERVISORY SERVICE, the Korea Securities Depository, the Korea Exchange (KRX), financial associations, research institutes, and the financial sector on March 30 to finalize the "Benchmark Rate Reform Plan". Relevant agencies are periodically reviewing progress through public‑private task forces (TF) for each project.

The share of KOFR-based interest rate swap transactions rose to a preliminary 18.5% in the third quarter of this year. The target is to increase this by 15 percentage points annually, reaching over 70% by June 2030. The target for banks' FRN issuance is over 50% by June 2031, and policy financial institutions have a target 15 percentage points higher than banks each year. From January to September this year, KOFR-based FRN issuance amounted to 20.5 trillion won (about $14.8 billion), far exceeding last year's 5.8 trillion won (about $4.2 billion).

Administrative guidance for KOFR-based interest rate swaps began in July 2025. The original plan was to increase the share by 10 percentage points annually, reaching 50% by June 2030, with a second-year target of 20%. To encourage trading in long-term instruments, transactions with maturities over 5 years and up to 10 years are counted at 30% of their value, and those over 10 years at 50%. The guidance applies to 29 institutions, including 17 banks and 12 securities firms. The FRN target applies to 20 financial companies, and new KOFR-linked issuances from January 2 to June 30 this year are also recognized as first-year performance.