FSC Announces New Legislation on Financial Benchmarks in South Korea

The following are the key features of the new legislation: 

• Designation of critical benchmarks—FSC may designate benchmarks that would have a significant impact on financial market stability, consumer protection, and the real economy as “critical” benchmarks.
• Administrator of critical benchmarks—FSC may designate entities which determine, publish, and provide critical benchmark as administrators.
• Obligations of administrator—Administrators are required to establish a committee to deliberate on important matters in regard with establishing and revising operational rules, collecting input data, and calculating and determining critical benchmarks. Administrators are also required to disclose details about operational rules and management of conflict of interest on their websites. Administrators should review the validity of their operational rules at least every two years and disclose the results.
• Cessation of provision of critical benchmarks—Any administrator that intends to cease the provision of critical benchmarks for unexpected reasons shall post a public announcement on the reasons and the date of cessation for more than 20 days and report to the FSC six months before the date of cessation. FSC may order the transfer of such operations to other administrators or the continuation of such operations for a certain period of time not exceeding 24 months, if the cessation would have a significant impact on financial markets.
• Obligations of users—Users of critical benchmarks shall provide a counterparty to a financial contract with written explanations on critical benchmarks.
• Prohibition of distortion and manipulation—Contributors of input data and administrators are prohibited from engaging in distortion or manipulation of input data and benchmarks, in addition to other unlawful activities.
• Inspection and punitive measures—FSC is to oversee compliance with the Financial Benchmark Act by administrators and may impose punitive measures against violations of laws such as administrative orders, punitive fines, and penalties.

Related Link: Press Release (PDF)

Keywords: Asia Pacific, Korea, Banking, Securities, Financial Benchmarks, Benchmarks Regulation, EU, Critical Benchmarks, Equivalence Regime, Interest Rate Benchmark, FSC