Euroclear Bank will sign a memorandum of understanding (MoU) with the Korea Securities Depository (KSD) to collaborate on collateral management services.
According to the MoU, Euroclear Bank-eligible securities will be used by international counterparties as collateral when securing collateralised transactions with domestic Korean investment companies.
Dubbed as the Euroclear Bank global "Collateral Highway", the service is expected to be launched by June 2013 and allows market entities to use securities as collateral to access central bank credit, secure transactions like repos and loans, and post securities collateral with CCPs as margin.
Presently dependent on cash and Korean securities as collateral, the agreement will enable Korean firms to secure securities lending and derivatives transactions using more than 600,000 securities eligible at Euroclear Bank.
KSD chairman and chief executive officer Kyung Kim said, "This MoU with Euroclear Bank unlocks the door to wider cross-border business flows with their 1,400 clients based in over 90 countries."
Korea’s secured loans segment is currently valued at $26bn (€20bn) and is likely to grow at double-digit annual rates, according to the bank.
Euroclear is a provider of domestic and cross-border settlement and related services for bond, equity, derivatives and fund transactions.
Established on 6 December 1974, KSD is the central securities depository with 59 shareholders.