Clearing members are classified into a general clearing member who clears both proprietary transactions and entrusted transactions and a proprietary clearing member who clears proprietary transactions only.

Admission requirements for a clearing member include authorization requirements, financial requirements, facilities requirements, human resources requirements, and social credibility requirements as shown below:

Requirements for a Clearing Member
Requirements Details
① Authorization requirements Should be authorized in OTC derivatives investment trading business
② Financial requirement

Equity capital requirements

General Clearing Member, Proprietary Clearing Member
  General Clearing Member Proprietary Clearing Member
a) Equity Capital Amount KRW 500 bil. or more KRW 50 bil. or more (or exceptions applied)
b) Equity Capital Ratio Ⅰ
  For 2014 From 2015
Commercial Banks Equity capital ratio ≥ 8% Common capital ratio ≥ 4.5% & core capital ratio ≥ 6% & total capital ratio ≥ 8%
Financial investment business other than a commercial bank Net operating capital ≥ total risk × 2 & NCR ≥ 150% Net operating capital ≥ total risk ×2 & NCR ≥ 100%
c) Equity Capital Ratio Ⅱ Equity capital ≥ 40% of clearing margin

Calculation of equity capital

  • (Commercial banks) Equity capital pursuant to Paragraph 1, Article 2 of the Commercial Banks Supervision Regulation
  • (Financial investment companies other than commercial banks) Total amount of capital in individual financial statements (total assets – total liabilities)

Qualifications for exceptions to ‘Equity capital amount’ (either ‘a)’ or ‘b)’)

  • a) Providing a guarantee statement on obligation fulfillment by the parent company or the largest shareholder,
  • b) providing a confirmation letter on obligation fulfillment by the foreign bank head office* in case of a foreign bank’s domestic branch
The parent company, head office of the foreign bank, etc. should have equity capital of KRW 50 bil. or more.
③ Facilities requirement

Infrastructure for stable and smooth operation of clearing and settlement business

  • Computer system (e.g., member OTC derivatives clearing system)
  • Administrative organization (e.g., application of obligation assumption, settlement handling, computer systems management, risk management, internal control, compliance and auditing)
  • Office
④ Human resources requirement

Human resources with expertise and integrity for adequate implementation of clearing and settlement business

  • Personnel completed training/education program on derivatives by a training institution, home and abroad
  • Personnel with practical experiences on derivatives transactions
  • Personnel who have expertise comparable to the above
⑤ Social credibility requirement

Sufficient social credibility

  • No fact of being suspended investment trading business for OTC derivatives