KSD Signs Agreement with ISCD to Establish Integrated Government Bond Account

(From the left) Lee Myung-ho, President of Korea Securities Depository, Peter Sneyers, CEO of Euroclear

[Asia Economy Reporter Minji Lee] The Korea Securities Depository (KSD) announced on the 1st that it has signed memorandums of understanding (MOUs) related to the establishment of a consolidated government bond account at the headquarters of Euroclear and Clearstream, which are international central securities depositories (ICSDs). The consolidated government bond account is an account that Euroclear and Clearstream will open with the KSD, allowing foreign investors to hold government bonds in a consolidated manner through this account without having to open individual accounts domestically.

The KSD is currently building the consolidated government bond account system in preparation for the revision of tax laws exempting interest and capital gains tax on foreign investors' government bond investments, and plans to launch it in the first half of next year. Previously, the KSD operated a consolidated government bond account with Euroclear for about 15 months starting in 2009. However, the operation was suspended at the end of 2010 following the government's withdrawal of the tax exemption measure for foreign investors' government bond investments.

The government has been making various efforts to enhance accessibility to the government bond market, including tax exemption for foreign investors' government bond investments and promoting the inclusion of Korean government bonds in global government bond indices, to modernize the system in line with the scale of Korea's government bond market. The domestic government bond market has grown more than twofold, from 491 trillion won in 2014 to 926 trillion won last year.

The KSD stated, "The necessity and importance of the consolidated government bond account have been highlighted as a support measure for this, making the signing of this MOU highly significant," and added, "We expect to accelerate cooperation with ICSDs to advance the opening of each institution's consolidated account services."

When foreign investors use the consolidated government bond account, they can improve accessibility to government bond investments as foreign investor registration, appointment of a standing agent and custodian, and opening of domestic direct accounts are unnecessary. Additionally, offshore transactions between foreign investors are possible within the ICSDs, enhancing the convenience and usability of government bond investments compared to using domestic and overseas direct accounts.

Lee Myung-ho, President of the KSD, said, "With Korean government bonds successfully included as a watchlist country in the World Government Bond Index (WGBI) last September and growing interest from overseas investors in government bond investments, we hope that this MOU signing will accelerate the consolidated government bond account establishment project," and added, "We look forward to it leading to the final inclusion of government bonds in the WGBI next year."

This content was produced with the assistance of AI translation services.