Korea gives secured lenders comfort at last

Author: | Published: 1 Jun 2005

International investors in Korea have been baffled and frustrated in recent months by what they see as restrictive national policies on foreign capital and trade. Despite the Korean government's denials, investors say the new stance is inconsistent with the open-arms approach the crisis-hit economy of the late 1990s took towards private equity funds.

But amid the standoff, bankers booking derivatives, repurchase and securities lending business remain generally at ease, pleased even, about their prospects. Now that the National Assembly has finally passed the country's consolidated insolvency law (to take effect in March 2006, one year after its promulgation), bankers' biggest concerns about trading with Korean counterparties will soon be dispelled. After several years and reams of draft legislation, the law promises foreign banks the legal certainty over close-out netting and collateralization they have been struggling for.

Members of the International Swaps and Derivatives Association (Isda) are pleased to see close-out netting...