Republic of Korea: Financial Sector Assessment Program - Detailed Assessment of Compliance on the CPSS-IOSCO Principles for Financial Market Infrastructures — BOK-WIRE+ and KRX CCP

IMF Staff Country Reports, October 14, 2014

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Republic of Korea: Financial Sector Assessment Program - Detailed Assessment of Compliance on the CPSS-IOSCO Principles for Financial Market Infrastructures — BOK-WIRE+ and KRX CCP

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Bibliographic details

• Published: October 14, 2014
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9781498393171.002

Executive summary — system roles and status

• BOK-WIRE+ is the real-time interbank gross payment and settlement system and the backbone of the infrastructure where the final payments of various markets are settled. It is operated by the Bank of Korea (BOK).
• The Korea Exchange (KRX) operates three exchanges and offers clearing and settlement services for all securities and derivatives traded on the KRX.
• Authorities plan to establish a central counterparty (CCP) for over-the-counter (OTC) derivatives at a future date; discussions continue about transforming current trade reporting systems into full-fledged trade repositories (TRs).
• The planned CCP for OTC derivatives should ensure full compliance with the Principles for Financial Market Infrastructures (PFMI) before being launched, taking into account lessons learned from the assessment of the CCP for exchange-traded products.

Key findings on BOK-WIRE+

• BOK-Wire+ is largely compliant with the PFMI and is overall sound.
• The system is subject to comprehensive and transparent risk management frameworks comprising:
  • clear policies and guidelines,
  • governance arrangements,
  • operational systems including regularly tested default and business continuity procedures.
• All transactions once settled in BOK-Wire+ are deemed final and irrevocable, as well as bankruptcy remote.

Deficiencies and areas for improvement

• Collateral risk management:
  • Recommendation that the operator of BOK-Wire+ improves the collateral risk management framework by adopting regular testing of haircuts and an independent validation of haircut procedures at least annually.
• Legal/regulatory clarity:
  • The BOK should provide more clarity in the regulations regarding settlement finality and queue management, particularly with regard to revocation of queued transactions.
• Disclosure:
  • The BOK should fully implement the disclosure framework, including disclosure of relevant rules and regulations in English.
• Oversight powers:
  • BOK’s oversight powers should be strengthened to include linked financial market infrastructures (FMIs) and participants, particularly to obtain authentic information and enforce compliance.

Subjects and keywords (as listed)

• Central counterparty clearing house, Collateral, Financial institutions, Financial markets, Financial regulation and supervision, Operational risk, Payment systems, Securities
• capital market, central bank, Central counterparty clearing house, clearing member, Collateral, CR, Global, investment strategy, ISCR, KRX regulation, liquidity risk, Operational risk, Payment systems, Securities

Publication metadata (preserved)

• Pages: 198
• Volume: 2014
• Issue: 308
• Series: Country Report No. 2014/308
• Stock No: 1KOREA2014004
• DOI: https://doi.org/10.5089/9781498393171.002
• ISBN: 9781498393171
• ISSN: 1934-7685
• Publication date on landing page: October 14, 2014

International Monetary Fund. IMF Staff Country Report No. 2014/308 (October 14, 2014).

Content in this bundle

• Executive Summary
  • Executive Summary (Markdown version)
  • Executive Summary (PDF)