Kookmin Bank and government-owned Korea Development Bank are gearing up to become the first domestic Korean banks to structure and market credit derivatives. KDB, with USD65 billion in assets, wants to do this now to benefit from an anticipated increase in demand for credit products, according to H.J. Cho, manager, trading department, financial engineering team in Seoul. The firm has added incentive since margins in interest-rate and currency derivatives are being squeezed as more banks start quoting prices on these instruments, he noted. KDB has a USD25 billion (notional) derivatives book. Kookmin, with KRW97 trillion (USD77.6 billion) in assets, wants to enter because low domestic interest rates are leading yield-hungry investors to consider credit derivatives for the first time, said Nick O'Kane, manager, derivatives and structured products in Seoul (DW, 2/4).
A marketer at a foreign bank in Seoul acknowledged that KDB and Kookmin would certainly have stronger client relationships than foreign rivals. However, while the market is currently attractive, it remains a difficult one for all banks because of regulatory obstacles and caution among investors about using derivatives, he continued.
