South Korea’s Financial Services Commission today (Thursday) held a seminar to explain to reporters the rationale behind its initiative to establish covered bond legislation in the country, with the law still being developed, an official at the regulator told The Covered Bond Report.

Financial Services Commission offices, Seoul

The official said that no new announcements were made concerning the regulator’s plans to introduce covered bond legislation, and referred back to previously announced plans to have draft legislation in place in time for consideration by the National Assembly in November. He said that the law was still being formulated.

“The event was more of a background seminar on the concept of covered bonds,” said the official. “It was mainly to let the public know, through reporters, how it will help the financial system, by bringing household debt under control and establishing more stable long term funding for banks.”

He also cited a global trend of jurisdictions turning to the asset class, and said that the seminar set out to explain the need for a legal framework to be developed to accommodate the use of covered bonds.

The Financial Services Commission (FSC) has been looking into facilitating covered bond issuance for some time, having in June 2011, in conjunction with the Financial Supervisory Service (FSS), released best practice guidelines before this summer announcing that it is proposing covered bond legislation because the guidelines had proved to be an insufficient step. The regulator a few months ago formed a taskforce to lead on the development of covered bond legislation, and the official at the FSC said that members of the taskforce were present at the seminar, and participated in a Q&A session.

Only Kookmin Bank and Korea Housing Finance Corporation have issued covered bonds so far  in South Korea, Kookmin having done so in 2009 on a contractual basis while KHFC has issued under legislation governing the state-owned institution.