The Korea Securities Depository (KSD) signed MOUs with Euroclear and Clearstream on Nov. 29 and Dec. 1 so that foreigners’ investment in South Korean government bonds can be made easier based on omnibus accounts. The system is scheduled to be put into operation in the first half of 2023, and then foreign investors’ registration certificates can be made unnecessary.
Euroclear and Clearstream are two of the world’s largest international central securities depositories and securities under their custody amounted to 55 trillion euros at the end of last year. Those are headquartered in Brussels and Luxembourg, respectively.
According to the MOUs, Euroclear and Clearstream will open the omnibus account at the Korea Securities Depository so that foreign investors can keep their South Korean government bonds using the accounts even without separate account opening. At present, every foreign investor to invest in the government bond must receive the certificate from the Financial Supervisory Service, appoint a South Korean financial institution as a custody agent, and open an individual account via the agent.
Another advantage of the omnibus account is that offshore trading of the bond between foreign investors is possible. Previously, the Ministry of Economy and Finance announced that the Income Tax Act would be revised so that non-residents’ and foreign corporate bodies’ interest income and capital gains from government bond investment are not subject to taxation starting from next year. The non-taxation is already in effect based on the enforcement decree of the act.