Seoul-based Korea Exchange Bank, with over KRW61.4 trillion (USD51.9 billion) in assets, is considering investing in synthetic structured credit instruments, including collateralized debt obligations. "It's an idea I have," said Hee Dong Kim, head of the financial engineering department in Seoul. Kim said he is planning to speak with international derivatives houses to gain a further understanding of CDOs and credit baskets.
KEB has steered away from credit derivatives since experiencing losses in credit-linked products in the Asian financial crisis, but is tempted to enter the market because of improvements in liquidity and stability. These instruments would allow the bank to pick up additional yield over traditional bonds. Kim said it is too early to comment on the potential size of investments.
"Asset-wise, they're a big player," said a credit marketer at JPMorgan, noting that he plans to speak with the bank.
In addition to an increasing number of domestic banks and insurers including LG Insurance (DW, 7/6) eyeing CDOs, local securities houses are also looking to step into the market later this year, pending regulatory approval (DW, 7/27).
