KDB sets up credit derivatives desk in Seoul

The Korea Development Bank (KDB) has established a credit derivatives desk following an internal reorganisation of the bank's derivatives operations and in response to the growing credit derivatives market in the country, said Hae-Geun Chung, head of the financial engineering department at the bank in Seoul.

He said that while regulations requiring each transaction to be reported to the Bank of Korea and local watchdogs have slowed the potential growth of the market, volumes have doubled from last year. He added that he expected the market to continue to grow next year.

The three-strong credit derivatives and asset-backed securities (ABS) team will focus on structuring credit default swaps, credit-linked notes, total return swaps and collateralised debt obligations (CDOs). JS Chung will head the unit. Chung was previously a member of KDB's old derivatives unit.

This unit was effectively split up to produce four specialised teams: credit derivatives and ABS, synthetic products and options, fixed-income derivatives and a middle-office team. The bank also plans to add a new financial products team that will work on developing new credit, interest rate and equity derivative products by the end of July, said HG Chung. But he said there were no plans to establish a dedicated equity derivatives team this year.

KDB plans to issue its first balance-sheet synthetic CDO for a client in the next two to three months, but Chung declined to comment further on the deal.