Korea Development Bank has been talking with regulators about launching a won-denominated domestic credit derivatives market, potentially before year-end. "There's a real need to have a credit market in Korea," said Man Ho Yoon, general manager in the financial engineering department in Seoul.
The bank has been making inroads with regulators and sees indications that effort will move forward, although the exact timing is still not clear. "Investors continue to look for high yields, which domestic products can offer," Yoon said, noting for instance that tight spreads in U.S. dollar-based notes have caused some investors to shy away from credit structures.
The bank currently offers dollar-based collateralized debt obligations to clients, which it co-structures with international houses. For domestic trades, Yoon said he initially expects clients to get comfortable with traditional credit-default swaps before moving into more-structured instruments such as credit-linked notes.
