First transaction linked to international central securities depository

Bank expands one-stop service for overseas institutional investors

Woori Bank's headquarters in Jung-gu, Seoul [Woori Bank]
Woori Bank's headquarters in Jung-gu, Seoul [Woori Bank]

Woori Bank has completed the first transaction by a domestic bank in which a Korean government bond was traded and settled with an overseas financial institution through an international central securities depository (ICSD), with a foreign exchange deal bundled into the same package. It is the first such completed transaction by a Korean bank since regulators this year permitted domestic financial institutions to settle government bonds offshore via ICSD.

Woori Bank announced Thursday that it had concluded a package transaction with an overseas financial institution, providing both the trading and settlement of government bonds and the foreign exchange services required for the investment.

An ICSD is an international settlement network that connects securities transactions between investors across different countries; Euroclear and Clearstream are the most prominent examples. Foreign investors can trade Korean government bonds through an omnibus account that the ICSD holds at the Korea Securities Depository, without needing to establish a separate custodian or open individual accounts in Korea.

The government and the Korea Securities Depository, along with other relevant authorities, drew up guidelines in late January allowing domestic banks and brokerages to directly trade and settle Korean government bonds offshore with foreign investors through ICSD. The regime took effect in mid-February. The move was designed to improve foreign investors' access to the Korean bond market and broaden supply channels in line with South Korea's inclusion in the World Government Bond Index (WGBI). Korea's WGBI inclusion began in April this year and is being phased in over eight months.

In the transaction, Woori Bank provided not only the government bond supply but also won-currency conversion and foreign exchange and derivatives services to help manage exchange rate risk during the investment process. The arrangement allows foreign investors buying Korean government bonds to handle all bond and foreign exchange needs through a single bank.

Choi Jun-gi, deputy general manager of Woori Bank's money market sales division, said the transaction was significant because a domestic bank had used a global settlement network to supply government bonds directly to overseas institutional investors while also linking in foreign exchange services. "Going forward, we will expand package sales combining government bonds with foreign exchange and currency hedging for global financial institutions, supporting the globalization of Korea's government bond market and continuously strengthening our competitiveness in serving overseas institutional investors," he said.

Meanwhile, Woori Bank earlier this year issued $600 million in foreign-currency senior bonds — the first public offering of foreign-currency bonds by a commercial bank this year. The issuance was structured as a dual-tranche deal, combining a three-year floating-rate tranche and a five-year fixed-rate tranche.


rim@heraldcorp.com