South Korea's Financial Services Commission announced a draft bill to create a new law regulating financial benchmarks such as the certificate of deposit rate and the cost of funds index, or COFIX, modeled on the European Union Benchmarks Regulation.

According to the bill, the FSC will regulate the way benchmarks are set by setting criteria to ensure fairness and transparency.

In the case of the COFIX, the proposed regulation will cover the Federation of Korean Banks, which publishes the weighted index based on interest rates applied to funds raised by banks. It will also apply to banks and lending institutions which price their loans based on the COFIX.

The proposed law will include penalties against fraud, manipulation and distortion of the benchmarks. The legislation will also provide fines and remedies for offenses.

The FSC plans to submit the bill to the National Assembly in September.

The proposal is open for public comments until July 30.