South Korea: New direct link - Update IV
Note: This announcement, originally published on 15 May 2024 and updated on 11 June, 25 June and 4 July 2024, has been updated with new expected settlement result times and disclosure reporting requirements.
Clearstream Banking1 is pleased to inform clients that effective
1 July 2024
a new direct link to the South Korean market for the purpose of settling and safekeeping Korean government bonds, including Korean Treasury Bonds (KTBs), and Monetary Stabilisation Bonds (MSBs) in an omnibus account structure will be introduced.
Clearstream Banking will have its own foreign nominee omnibus account opened with the local Korean central securities depository (CSD), Korean Securities Depository (KSD). The link will be operated directly by Clearstream Banking with the KSD.
Direct link details
CSD: Korea Securities Depository
Busan International Finance Center
40, Munhyeongeumyung-ro, Nam-gu
Busan, 48400
Republic of Korea
Depository Code: 2K
SWIFT address: KSDCKRSEGFS
Clearstream Banking securities account number with KSD: 6930-0000-02
Clearstream Banking Investor Registration Certificate Number (IRC): 27028
Eligible security types
- Korean government bonds, which include Korea Treasury Bonds (KTBs), treasury bills, Foreign Exchange Stabilisation Fund Bonds (FX SFBs) denominated in KRW, National Housing Bonds (NHBs) Type 1)
- Monetary Stabilisation Bonds (MSBs)
Investor identification and account opening
To settle and safekeep Korean government bonds and MSBs with Clearstream Banking, clients are requested to take note of the following:
1. Investor eligibility requirements
Clients may only settle and safekeep Korean government bonds and MSBs with Clearstream Banking if they comply with the following eligibility criteria:
a. Beneficial owners must be considered as foreign investors, and therefore, not South Korean residents (including residents in South Korea for tax
purposes).
b. Beneficial owners cannot be individuals.
c. Beneficial owners must not have a permanent establishment or be a branch in South Korea for tax purposes.
d. Overseas Investment Vehicles (OIVs) who are considered as beneficial owners.
2. Obtaining a Legal Entity Identifier
Foreign investors (excluding individual investors) without an IRC number are required to obtain a Legal Entity Identifier (LEI) before investing in Korean government bonds and MSBs.
Exception: Foreign investors who already have an IRC number must continue to use this number and cannot substitute it with the LEI or any other identification method.
3. Account opening requirements
a. Clients of Clearstream Banking who wish to act as an intermediary and hold Korean government bonds and MSBs for underlying beneficial owners must first obtain from the Korean National Tax Service (NTS):
- A Qualified Foreign Intermediary (QFI) status; and
- A QFI tax exemption, on interest income and capital gains on Korean government bonds and MSBs.
Further details on the tax requirements will be published in due course. In the meantime, please contact tax@clearstream.com.
Clients should take note that Clearstream Banking S.A. and Clearstream Banking A.G. have been approved as Qualified Foreign Intermediaries (QFIs) by the Korean National Tax Service (NTS) on 28 March 2023 and 15 April 2024 respectively.
b. Once the QFI status and QFI tax exemption have been obtained, the Clearstream Banking client who is acting as intermediary for underlying beneficial owners must open a segregated account per beneficial owner in Clearstream Banking’s books. This will be in addition to the client’s existing main Clearstream Banking account.
Note i: The requirement for opening segregated Clearstream Banking accounts per beneficial owner is to distinguish third-party assets from proprietary assets on Clearstream Banking’s direct omnibus Korean link and to facilitate the automated monthly disclosure reporting of beneficial owners holding Korean issued government bonds and MSBs.
Note ii: As per point 1 above, account opening requests for beneficial owners that are South Korean nationals, residents of South Korea and individuals will not be accepted. Similarly, account opening requests for Overseas Investment Vehicles (OIVs) who are not considered as beneficial owners will not be accepted as well. Clients should note that access to this market is subject to conditions and criteria which will be assessed on a case-by-case basis. Please contact your Relationship Manager to confirm or make the necessary arrangements, in case of doubt. Clearstream Banking reserves the right to revoke a client’s access to the market in the event that such conditions and criteria are not fulfilled.
Note iii: Beneficial owners who already have an IRC number in the South Korean market must provide this number when opening the related segregated account in Clearstream Banking’s books. In this case, the beneficial owner’s IRC number will be mentioned in all trading, settlement and reporting activities. Otherwise, beneficial owners with no existing IRC number must provide their LEI when opening the related segregated account in Clearstream Banking’s books. In this case, the beneficial owner’s LEI will be mentioned in all trading, settlement and reporting activities.
Note iv: Clearstream Banking segregated accounts are not required for those clients who wish to settle and safekeep Korean government bonds and MSBs as proprietary assets.
Please refer to the Clearstream Banking Client Handbook (Section 2.2 - “Opening additional CBL accounts”) for further details on how to open the segregated account.
c. The Clearstream Banking client who is acting as intermediary for underlying beneficial owners must file for BO tax exemption for each underlying beneficial owner. Likewise, the Clearstream Banking client who is holding Korean government bonds and MSBs as proprietary assets must also file for BO tax exemption for themselves.
Further details on the tax requirements will be published in due course. In the meantime, please contact tax@clearstream.com.
Note: There is no requirement to open segregated cash or securities accounts for each BO in the local market.
4. Submission of beneficial owner details
a. Clients with a CBL account should send the following Swift MT599 to Clearstream Account Admin Singapore
Clients with a CBF-i 6-series account should send the following Swift MT599 to the Clearstream Client Data Management Team at DAKVDEFFXXX.
QUOTE
Attn: Clearstream Account Admin Singapore (CBL accounts) or Clearstream Client Data Management Team (CBF-i accounts)
Please take this MT599 as our submission of the following beneficial owner details:
CBL Account Number: <insert account number of the beneficial owner holding prop assets>
Beneficial Owner Name: <insert name of beneficial owner exactly as per existing IRC or registered LEI>
IRC Number: <insert existing IRC number, if applicable. The IRC number here must also match the IRC number submitted on the BO tax exemption form>
Legal Entity Identifier: <insert BO LEI regardless of whether the BO has an IRC number or not. If the BO does not have an existing IRC number then the LEI here must also exactly match the LEI submitted on the BO tax exemption form>
UNQUOTE
b. The beneficial owner details submitted in the MT599 mentioned above must match exactly those submitted on the BO tax exemption form and vice versa.
Note i: The client’s account in Clearstream Banking will not be made eligible to invest in Korean government bonds and MSBs until the requirements mentioned above in points 2, 3 and 4 are met.
Note ii: Clients are responsible to pro-actively update these BO details with their Relationship Manager, as well as renew the BO tax exemption form whenever there are changes to the BO details.
Clients are liable for the usage of any safekeeping accounts obtained through Clearstream Banking. Clearstream Banking shall bear no responsibility for any illegitimate or erroneous use – for any trading or other purpose – of such safekeeping accounts. Clearstream Banking does not validate whether the safekeeping accounts that clients use in their settlement instructions sent to Clearstream Banking represent the legitimate investor who ordered the underlying transaction. Clearstream Banking shall therefore not be responsible if a client uses a safekeeping account belonging to an investor other than the investor on whose behalf the relating transaction has been or was deemed to be executed or settled.
Settlement-related information
1. Procedures for domestic counterparties
Clients receiving/delivering Korean government bonds and MSBs from/to the South Korean market must request their domestic counterparty to deliver/receive the Korean government bonds and MSBs to/from Clearstream Banking’s account with the Korea Securities Depository (KSD) by referring to the following Standard Settlement Instruction (SSI):
Field | Value |
KSD BIC | KSDCKRSE |
Clearstream Banking securities account number with KSD | 6930-0000-02 |
Clearstream Banking BIC | CEDELULL |
IRC number (IRC number that ranges from 1- to 5-digits) of the Clearstream Banking client | For example, 1, 12, 123, 1234 or 12345 |
LEI (20-character alpha-numeric code) of the beneficial owner at Clearstream Banking | For example, |
Clearstream Banking beneficial owner account number (5-digit number) | For example, 12345 |
Note: Clearstream Banking clients who already have an IRC number must continue to use this number and cannot substitute it with the LEI or any other identification method.
2. Allowed countervalue difference
A maximum difference in countervalue of KRW 30,000 is allowed for matching and settlement of against payment transactions with domestic counterparties. In the event of a discrepancy within this limit, the amount specified by the domestic counterparty will prevail.
3. Specific settlement rules / settlement restrictions
Domestic free of payment settlement
Domestic free of payment settlement in Korean government bonds and MSBs:
- is limited to no change of beneficial owner (NCBO) portfolio transfers.
- is not allowed from payment date-2 business days to payment date of entitlements.
- Is not allowed from redemption date-2 business days to redemption date.
Domestic against payment settlement
Domestic against payment settlement in Korean government bonds and MSBs:
- can only be settled in Korean Won (KRW).
- is allowed from payment date-2 business days to payment date of entitlements.
- is not allowed on redemption date.
- may be impacted when settlement date is also a Bank of Korea (BOK) Reserve Day.
Note: BOK Reserve Day occurs on the 2nd Wednesday of each month and clients should take note that cash transfer activities related to settlement will be limited in South Korea on these days.
Bridge settlement
Bridge settlement in Korean government bonds and MSBs as well as in KRW is not possible.
Internal settlement
Internal settlement of Korean government bonds and MSBs is possible against any Clearstream-eligible currency, except KRW. KRW is not allowed for internal settlement.
4. Instruction specifications
Instruction specifications – Xact via Swift and Xact File Transfer
In the following tables, M=Mandatory; O=Optional; C=Conditional;
Seq=SWIFT Message (sub)sequence.
MT540 | Receive Free | Seq | ||
M | :98a: | :TRAD | //Trade date/time | B |
O | :90a: | :DEAL | //Deal price | |
M | :95P: | :PSET | //KSDCKRSE[XXX] | E1 |
M | :95P: | :DEAG | //Counterparty’s BICa | |
M | :97A: | :SAFE | //Counterparty’s account number at the KSDb | |
O | :95P: | :SELL | //Ordering party’s BIC, if different from DEAG | |
O | :97A: | :SAFE | //Ordering party’s account | |
MT541 | Receive Against Payment | Seq | ||
M | :98a: | :TRAD | //Trade date/time | B |
O | :90a: | :DEAL | //Deal price | |
M | :95P: | :PSET | //KSDCKRSE[XXX] | E1 |
M | :95P: | :DEAG | //Counterparty’s BICc | |
M | :97A: | :SAFE | //Counterparty’s account number at the KSDd | |
O | :95P: | :SELL | //Ordering party’s BIC, if different from DEAG | |
O | :97A: | :SAFE | //Ordering party’s account | |
MT542 | Deliver Free | Seq | ||
M | :98a: | :TRAD | //Trade date/time | B |
O | :90a: | :DEAL | //Deal price | |
M | :95P: | :PSET | //KSDCKRSE[XXX] | E1 |
M | :95P: | :REAG | //Counterparty’s BICa | |
M | :97A: | :SAFE | //Counterparty’s account number at the KSDb | |
O | :95P: | :BUYR | //Beneficiary’s BIC, if different from REAG | |
O | :97A: | :SAFE | //Beneficiary’s account | |
MT543 | Deliver Against Payment | Seq | ||
M | :98a: | :TRAD | //Trade date/time | B |
O | :90a: | :DEAL | //Deal price | |
M | :95P: | :PSET | //KSDCKRSE[XXX] | E1 |
M | :95P: | :REAG | //Counterparty’s BICc | |
M | :97A: | :SAFE | //Counterparty’s account number at the KSDd | |
O | :95P: | :BUYR | //Beneficiary’s BIC, if different from REAG | |
O | :97A: | :SAFE | //Beneficiary’s account | |
a. The delivering/receiving local custodian’s BIC.
b. The delivering/receiving local custodian’s account number at the KSD.
c. The delivering/receiving local broker’s/local dealer’s BIC.
d. The local broker’s/local dealer’s account number at the KSD.
Instruction specifications - Xact Web Portal
In the following tables, M=Mandatory; O=Optional; C=Conditional.
Receive Free | ||
M | Trade date | |
O | Deal price | |
Delivering settlement parties | ||
M | Depository Format | BIC |
Depository Identifier | KSDCKRSEXXX | |
M | Party 1 Format | BIC |
Party 1 Identifier | counterparty’s BICa | |
M | Party 1 Safekeeping account | counterparty’s account number at the KSDb |
O | Party 2 Format | BIC |
Party 2 Identifier | ordering party’s BIC | |
O | Party 2 Safekeeping account | ordering party’s account |
Receive Against Payment | ||
M | Trade date | |
O | Deal price | |
Delivering settlement parties | ||
M | Depository Format | BIC |
Depository Identifier | KSDCKRSEXXX | |
M | Party 1 Format | BIC |
Party 1 Identifier | counterparty’s BICc | |
M | Party 1 Safekeeping account | counterparty’s account at the KSDd |
O | Party 2 Format | BIC |
Party 2 Identifier | ordering party’s BIC | |
O | Party 2 Safekeeping account | ordering party’s account |
Deliver Free | ||
O | Deal price | |
Receiving settlement parties | ||
M | Depository Format | BIC |
Depository Identifier | KSDCKRSEXXX | |
M | Party 1 Format | BIC |
Party 1 Identifier | counterparty’s BICa | |
M | Party 1 Safekeeping account | counterparty’s account at the KSDb |
O | Party 2 Format | BIC |
Party 2 Identifier | beneficiary’s BIC | |
O | Party 2 Safekeeping account | beneficiary’s account |
Deliver Against Payment | ||
O | Deal price | |
M | Depository Format | BIC |
Depository Identifier | KSDCKRSEXXX | |
M | Party 1 Format | BIC |
Party 1 Identifier | counterparty’s BICc | |
M | Party 1 Safekeeping account | counterparty’s account at the KSDd |
O | Party 2 Format | BIC |
Party 2 Identifier | beneficiary’s BIC | |
O | Party 2 Safekeeping account | beneficiary’s account |
a. The delivering/receiving local custodian’s BIC.
b. The delivering/receiving local custodian’s account number at the KSD.
c. The delivering/receiving local broker’s/local dealer’s BIC.
d. The local broker’s/local dealer’s account number at the KSD.
5. Settlement deadlines
The deadlines shown below are valid provided that the client's instructions are complete, accurate and eligible for straight-through processing (STP) in Clearstream Banking and in the local market. Clients must also ensure that any necessary provision is available. If any of these criteria are not met, Clearstream Banking cannot guarantee timely settlement.
Important Note: As part of Clearstream Banking’s internal compliance procedures, all incoming client instructions will be automatically scanned before entering transaction processing. Instructions that are internally flagged as requiring further manual investigation are set to status pending, with such status immediately reported to the client via their chosen media channel(s), until either being manually released for processing or rejected. In order to ensure that instructions being investigated do not miss the applicable deadlines, clients are advised to input instructions at least 15 minutes before the associated deadline.
Note: Free of payment domestic instructions related to Korean government bonds and monetary stabilisation bonds are limited to no change of beneficial ownership (NCBO) portfolio transfers only.
Settlement times in Central European Summer Time (CEST) / Central European Time (CET)
1 July 2024 – 26 October 2024 (CEST)
Instruction | Provisioning | Deadline for receipt of valid instruction | Expected settlement results | ||||
start | end | from | to | value | |||
AP=Against payment FOP=Free of payment SD=Settlement date | |||||||
Receipts | FOP | 09:30 | 09:25 | 09:25 | 02:00 | 10:00 | |
AP | 21:30 | 02:55 | 02:55 | 02:00 | 10:20 | SD | |
Deliveries | FOP | 21:30 | 09:25 | 09:25 | 02:00 | 10:00 | |
AP | 21:30 | 02:55 | 02:55 | 02:00 | 10:20 | SD | |
27 October 2024 – 29 March 2025 (CET)
Instruction | Provisioning | Deadline for receipt of valid instruction | Expected settlement results | ||||
start | end | from | to | value | |||
AP=Against payment FOP=Free of payment SD=Settlement date | |||||||
Receipts | FOP | 08:30 | 08:25 | 08:25 | 01:00 | 09:00 | |
AP | 21:30 | 01:55 | 01:55 | 01:00 SD | 09:20 SD | SD | |
Deliveries | FOP | 21:30 | 08:25 | 08:25 | 01:00 SD | 09:00 SD | |
AP | 21:30 | 01:55 | 01:55 | 01:00 SD | 09:20 SD | SD | |
Settlement times in Korea Standard Time (KST)
All Year
Instruction | Provisioning | Deadline for receipt of valid instruction | Expected settlement results | ||||
start | end | from | to | value | |||
AP=Against payment FOP=Free of payment SD=Settlement date | |||||||
Receipts | FOP | 16:30 | 16:25 | 16:25 | 09:00 | 17:00 | |
AP | 05:30 | 09:55 | 09:55 | 09:00 SD | 17:20 | SD | |
Deliveries | FOP | 05:30 | 16:25 | 16:25 | 09:00 SD | 17:00 | |
AP | 05:30 | 09:55 | 09:55 | 09:00 SD | 17:20 | SD | |
Cash related information
1. Cash correspondent and settlement bank details
Currency: | Korean Won (KRW) |
CCB name: | The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch |
Clearstream Banking account: | 002-177053-041 |
Swift address: | HSBCKRSEXXX |
2. Cash correspondent and settlement bank cash timings
1 July 2024 - 26 October 2024
Pre-advicea: | VD 07:30 CEST |
Withdrawalb: | VD 07:30 CEST |
Transferc: | Not available |
FXd: | VD-2 07:30 CEST |
27 October 2024 - 29 March 2025
Pre-advicea: | VD 06:30 CET |
Withdrawalb: | VD 06:30 CET |
Transferc: | Not available |
FXd: | VD-2 06:30 CET |
a. Incoming KRW (other than income proceeds resulting from Korean government bond and MSB positions held with Clearstream Banking) must always be pre-advised. Beneficial owners are required to insert their IRC number or LEI into field :50: of their Swift MT210 message.
Example when it is an IRC:
:50:12345
Example when it is a LEI:
:50:123456AB789CD1EFH01
Note: Clearstream Banking clients who already have an IRC number must continue to use this number and cannot substitute it with the LEI or any other identification method.
Additionally, for funds to be allocated to beneficial owners’ Clearstream Banking account in time, beneficial owners must request their local cash correspondent bank to include their Clearstream Banking account number (5-digit number) in the narrative field of their payment instruction. Failure to do so will lead to late credit of funds in the beneficial owners’ Clearstream Banking account.
b. Beneficial owners may transfer funds between their own KRW account, held with a local cash correspondent bank, and the KRW account of Clearstream Banking, held at HSBC Seoul Branch. For such withdrawals of KRW from Clearstream Banking, beneficial owners are required to insert their IRC number or LEI into field :72: of the MT202, :70: of the MT103 or narrative field of their cash withdrawal instruction.
Example when it is an IRC:
MT202
:72:12345
MT103
:70:12345
Example when it is a LEI:
MT202
:72:123456AB789CD1EFH01
MT103
:70:123456AB789CD1EFH01
Note i: Clearstream Banking clients who already have an IRC number must continue to use this number and cannot substitute it with the LEI or any other identification method.
Note ii: Decimals are not allowed in KRW for cash transfers.
c. Foreign exchange services for KRW are available to clients, only in relation to Clearstream Banking’s direct omnibus Korean link for Korean government bonds and MSBs. Clients settling Korean listed equities and Korean listed corporate bonds via Clearstream Banking’s depository, the Hongkong and Shanghai Banking Corporation Limited, Seoul Branch (depository code: 1K) must continue to follow the funding/repatriation process indicated in the section “Automatic conversion of KRW purchase and sale proceeds” at Settlement Services – South Korea.
d. Book transfers in KRW will not be permitted in Clearstream Banking. Similarly, internal settlement against KRW will not be permitted.
3. Overdrafts
Overdrafts in the South Korean Won (KRW) are currently not supported.
4. Bank of Korea (BOK) Reserve Day
BOK Reserve Day occurs on the second Wednesday of each month and clients should take note that cash transfer activities will be limited in South Korea on these days. It is therefore strongly advised for clients to send any cash instructions on the day prior to the BOK Reserve Day. Cash instructions sent on BOK Reserve Day itself will be handled on a best efforts basis.
Disclosure Reporting Requirements
Clients should take note that Clearstream Banking is obliged to disclose and report beneficial owner information (including but not limited to the identity of the beneficial owner and qualified foreign intermediary (QFI) immediately above the beneficial owner in the custody chain) to the KSD, who in turn has the obligation to disclose such information to the local Korean authorities. By holding Korean government bonds and MSBs with Clearstream Banking, clients are deemed to consent to the required legal disclosure. Such consent includes the appointment of the requestor (for example, the KSD, as appropriate) as attorney-in-fact of such clients, under power of attorney to collect from Clearstream Banking the required information to be disclosed.
Clients are advised that, under local regulations, the Korean authorities are entitled to require Clearstream Banking, through KSD, on request and/or on a regular basis, to disclose information or documents relating to the beneficial owners (including but not limited to the identity of the beneficial owner and QFI immediately above the beneficial owner in the custody chain) of Korean government bonds and MSBs held in the omnibus account maintained by Clearstream Banking at the KSD.
The following information will be disclosed and reported on a monthly basis on behalf of any beneficial owner who settles or safekeeps Korean government bonds and MSBs via Clearstream Banking:
a. holdings per beneficial owner
b. redemptions and income paid, per beneficial owner
c. settled internal and external transactions per beneficial owner
d. name, address, investor type and taxpayer identification number of the beneficial owner
e. name and taxpayer identification number of the qualified foreign intermediary (QFI) immediately above the beneficial owner in the custody chain
The above-mentioned information will be reported by the third business day of the following month, based on the activities of the beneficial owner in the previous month.
Clearstream Banking will not be responsible for the availability and/or timeliness, correctness or completeness of the information provided by its clients or underlying beneficial owners when preparing such disclosure reporting. Additionally, Clearstream Banking will also not be responsible for any penalties or sanctions or associated costs that could be imposed upon Clearstream Banking due to a client's failure to comply with one or more disclosure requirements. Such penalties, sanctions or associated costs will be automatically passed on to the failing client. The client undertakes to hold Clearstream Banking harmless and to indemnify Clearstream Banking from any loss, claim, liability or expense asserted against or imposed upon Clearstream Banking as a result of the client failure, whatever the failure, to comply with these disclosure requirements.
Brief overview of other services
The standard services of asset servicing for mandatory corporate events, including income and redemption payment processing, will be available. Income and redemption payments will be made in KRW, and can be converted into another currency upon request.
Collateral Management Services, including triparty repo and pledge will be available. Securities borrowing and lending, however, will not be available as these activities are not allowed in Clearstream Banking by the Korean authorities.
Further information
For further information about the new link and to discuss onboarding requirements, clients are invited to contact their Relationship Manager for further information.
Clients should note that this new link will be offered in addition to Clearstream Banking’s existing products and services that are supported in the South Korean market, which can be found in the Market Link Guide – South Korea. Clearstream Banking will therefore continue to support listed equities and corporate bonds via Depository Code 1K.
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1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking AG clients using Creation accounts), registered office at Mergenthalerallee 61, 65760 Eschborn, Germany, and registered in Register B of the Amtsgericht Frankfurt am Main, Germany, under number HRB 7500.