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Derivatives

Korean Banks Plan Won Interest-Rate Debut

Shinhan Bank and Koram Bank are setting up won interest-rate derivatives desks and intend to begin trading in the coming months. "We're getting involved to make money of course," said Y.D. Kim, deputy general manager of the foreign exchange and derivatives department at Shinhan Bank in Seoul. He continued that the bank, which has KRW55 trillion (USD42 billion) in assets, is currently setting up systems and should be ready to trade within two or three months. Whereas Kyung Lae Kim, head of the derivatives desk at Koram Bank in Seoul, said "we'll probably start trading by the end of October."

Koram Bank's Kim said the move into interest-rate derivatives is part of the bank's plans to move into the investment banking arena. He said the move started earlier this year when the bank hired Y.K. Ha, country business manager at Citibank in Seoul, as its new ceo. Kim himself joined two weeks ago from Korea Exchange Bank in Seoul, where he was head of the interest-rate derivatives, with the remit to set up the desk. He plans to hire one or two traders for the interest-rate desk and will look to execute client orders as well as proprietary trade for the bank's own book. Koram Bank has KRW29.4 trillion (USD22 billion) in assets.

Shinhan's Kim expects the domestic derivatives market to grow and therefore wants to get in on the action. A trader at Shinhan added that as Korean investment trust corporations received approval earlier this year to use interest-rate derivatives (DW, 5/7), many will set up desks in the coming months bolstering the market and prompting Shinhan to set up the operation. Kim noted that he has four professionals already working setting up the desk and speaking to potential clients, adding that the firm has occasionally traded U.S. dollar interest-rate derivatives. H.S. Jung, trader at the Korea Development Bank and S.K. Ro, trader at Kookmin Futures Co., have joined in recent months.

One interest-rate derivatives trader at an international house in Seoul said he is hoping to establish credit lines with the firms and commence trading with them in the coming months. He added that as more players enter the Korean interest-rate derivatives market it will boost liquidity.

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