The government and related institutions, including Korea Securities Depository (KSD), said on the 29th that they jointly prepared the "offshore Government Bonds settlement and withholding guidelines via international central securities depositories (ICSDs) by domestic financial institutions" to respond to offshore investment demand from foreign investors ahead of the inclusion of Korean Government Bonds in the World Government Bond Index (WGBI).
The guidelines put emphasis on expanding offshore supply channels for Government Bonds by opening the way for domestic financial institutions to buy, sell and settle Korean Government Bonds offshore with foreign investors through ICSDs. The related institutions are the Financial Services Commission, the Ministry of Economy and Finance, the National Tax Service, the Bank of Korea, the Financial Supervisory Service, Korea Securities Depository, and the Korea Financial Investment Association.
ICSDs, which operate the "Government Bonds omnibus account," a cross-border Government Bonds transaction support system linked with Korea Securities Depository, include Euroclear and Clearstream.
The guidelines are scheduled to take effect in mid-Feb. Related agencies expect that, with more offshore supply channels for Korean Government Bonds, global investors' access will improve and international credibility will be strengthened.
Taxation matters were also clearly defined. It stipulates that the relevant financial institutions must withhold at source on interest income arising from Government Bonds held through ICSDs, and specifies the method.
Korea Securities Depository President Lee Sun-ho said, "By vitalizing offshore Government Bonds supply, we will support meeting foreign investors' demand for Government Bonds and actively support the stable inclusion of Korean Government Bonds in the WGBI."