Korean Government Passes Netting Law
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Derivatives

Korean Government Passes Netting Law

The Korean National Assembly has passed provisions spelling out netting in financial contracts that is expected to give greater certainty to market participants entering derivatives.

The Korean National Assembly has passed provisions spelling out netting in financial contracts that is expected to give greater certainty to market participants entering derivatives. The act, called the Law Concerning Debt Rehabilitation and Bankruptcy, consolidates existing bankruptcy laws and for the first time addresses netting, according to Joon Park, partner at law firm Kim and Chang, which worked closely with the government on the provisions.

Derivatives houses can now rely on specific provisions rather than legal opinions and Park thinks could lead to foreign houses increasing their risk limits to Korea. The bankruptcy law is expected to be promulgated in the next few weeks and will go into effect a year later.

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