Bank of Korea

Bank of Korea
Bank name	Bank of Korea
Image title 1	Headquarters in Seoul
Established	12 June 1950
President	Rhee Chang-yong
Country	South Korea
Currency	South Korean won
Currency iso	KRW
Borrowing rate	3.50%
Reserves	419.2 billion USD
Website	www.bok.or.kr

Bank of Korea. The Bank of Korea is the central bank of the Republic of Korea, established in 1950 under the Bank of Korea Act. It holds the exclusive right to issue the national currency, the South Korean won, and is responsible for formulating and implementing monetary policy to ensure price stability. The bank also oversees the payment system, holds foreign exchange reserves, and contributes to the stability of the financial system.

History

The bank was founded on June 12, 1950, in Seoul, shortly before the outbreak of the Korean War, replacing the former Bank of Joseon which operated during the Japanese colonial period. Its early years were dominated by financing postwar reconstruction and stabilizing the economy following the Korean Armistice Agreement. Throughout the 1960s and 1970s, it supported the state-led industrialization under President Park Chung-hee, often prioritizing growth over price stability. A major shift occurred after the 1997 Asian financial crisis, which prompted significant reforms including the granting of operational independence in monetary policy through the 1998 amendment to the Bank of Korea Act. This period also saw enhanced cooperation with international institutions like the International Monetary Fund and the Bank for International Settlements.

Functions and objectives

The primary objective is to maintain price stability, as mandated by the Bank of Korea Act. Core functions include issuing banknotes and coins, formulating and implementing monetary policy, and acting as the banker and fiscal agent for the Government of South Korea. It also manages the nation's foreign exchange reserves, oversees and operates the payment system, and collects economic statistics. Furthermore, it contributes to the stability of the financial system through cooperation with other agencies like the Financial Services Commission and by participating in forums such as the Executives' Meeting of East Asia-Pacific Central Banks.

Organizational structure

The highest decision-making body is the **Monetary Policy Board**, which is responsible for setting monetary policy and the benchmark interest rate. The bank is headed by a **Governor**, appointed by the President of South Korea, who serves as the chairperson of the board. The operational structure includes several deputy governors and numerous departments, such as the **Financial Stability Department** and the **International Department**. Key research and analysis are conducted by institutes like the **Bank of Korea Institute** and the **Economic Research Institute**. The bank maintains a branch in New York City and representative offices in major global financial centers including London, Frankfurt, Tokyo, and Beijing.

Monetary policy

The bank conducts monetary policy primarily by setting the **Base Rate**, which influences overall market interest rates, to achieve its price stability target. Its main policy tools include open market operations, the standing lending facility, and reserve requirements for commercial banks. Since adopting an inflation targeting framework in the early 2000s, it has announced an annual inflation target, typically around 2%. The **Monetary Policy Board** meets eight times a year to review economic conditions and decide on the policy stance, with decisions closely watched by markets and institutions like Moody's Investors Service and Standard & Poor's. Its actions are often coordinated with fiscal policy from the Ministry of Economy and Finance.

Banknotes and coins

The bank has the exclusive authority to issue South Korean won banknotes and coins. Current banknotes feature prominent historical figures, such as King Sejong the Great on the 10,000-won note and Shin Saimdang on the 5,000-won note, and incorporate advanced security features to prevent counterfeiting. Coins are minted in denominations ranging from 1 to 500 won. The design and issuance of currency are managed with technical support from the Korea Minting and Security Printing Corporation. The bank also issues commemorative notes and coins for special events, such as the 2018 Winter Olympics in Pyeongchang.

Governors

The Governor is appointed for a four-year term by the President of South Korea with the consent of the National Assembly. The inaugural Governor was Koo Yong-seo. Notable governors include Kim Jong-pil, who later served as Prime Minister of South Korea, and Park Seung, who steered policy during the 1997 Asian financial crisis. The current Governor, Rhee Chang-yong, a former International Monetary Fund executive, took office in 2022. The role has evolved significantly, with modern governors often being internationally recognized economists or technocrats, such as former Governor Lee Ju-yeol, who previously worked at the International Monetary Fund.

Category:Central banks Category:Banks of South Korea Category:Economy of South Korea