Bank of Korea

The Bank of Korea is South Korea’s central bank and the institution responsible for issuing the South Korean won. It was established in Seoul on 12 June 1950 under the Bank of Korea Act, shortly before the Korean War began. The new institution assumed the assets and functions of the former Bank of Chōsen, which was liquidated at the same time. From its creation, the bank was assigned broad responsibilities covering monetary policy, currency issuance, banking and credit policy, foreign-exchange administration, and aspects of financial supervision. The bank’s first decades were shaped by war, reconstruction, inflation, foreign aid, and the rapid transformation of South Korea’s economic institutions. During the Korean War, its head office moved successively to Daejeon, Daegu, and Busan before returning to Seoul after the Incheon landing. The bank managed severe liquidity pressures, restrictions on withdrawals, wartime currency circulation, and efforts to contain inflation. It also played a role in arranging international financial resources and in supporting South Korea’s participation in the International Monetary Fund and the International Bank for Reconstruction and Development in the mid-1950s. During the 1950s and 1960s, the Bank of Korea used credit ceilings, reserve requirements, rediscount controls, loan-priority systems, and interest-rate measures to influence the allocation and quantity of credit. Its relationship with the government was particularly close. The state increasingly directed commercial banking and development finance as part of its industrialization strategy, while the bank helped manage foreign-exchange shortages, exchange-rate changes, development finance, and the transition from the hwan to the won in 1962. Regional private banks were re-established later in the 1960s, although the financial system remained strongly guided by government policy. The 1970s brought oil-price shocks, inflation, current-account pressures, and state-led support for heavy and chemical industries. The bank operated within a policy framework that included emergency economic measures, directed lending, and the National Investment Fund. In the 1980s, monetary restraint and fiscal consolidation contributed to lower inflation and more stable growth, while financial liberalization gradually expanded the role of non-bank institutions, foreign investors, and capital markets. The 1990s brought further liberalization but also vulnerabilities. South Korea’s exposure to the 1997 Asian financial crisis led to a severe liquidity squeeze, corporate failures, banking-sector restructuring, and an international rescue program. The Bank of Korea supported stabilization and acquired bonds connected with the restructuring of financial institutions. In the following decade, rapid credit-card lending, household debt, property-market pressures, and the 2003 SK Global accounting crisis tested the bank’s role as a provider of system liquidity. During the global financial crisis beginning in 2008, it reduced its policy rate and supplied liquidity to help stabilize markets. Today, the Bank of Korea’s primary statutory objective is price stability, pursued principally through decisions on the Base Rate and the operation of monetary-policy instruments. Its responsibilities also include financial stability, payment and settlement systems, currency issuance, economic and statistical analysis, foreign-exchange reserve management, and cooperation with domestic and international financial authorities. Monetary policy is formulated by the Monetary Policy Board, while the governor leads the bank’s executive administration. The institution operates from Seoul through a network of domestic branches and overseas representative offices. It is a public central-bank institution rather than a listed commercial bank, and it should not be confused with regional private banks in South Korea. The Bank of Korea (BOK) is the central bank of South Korea and the issuer of the country's currency, the South Korean won. Established under the Bank of Korea Act in 1950, it began operations during the early years of the Republic of Korea and was created to provide an institution dedicated to monetary and financial management. Its headquarters are in Seoul, and its work covers the national economy rather than ordinary retail banking. The BOK's principal statutory responsibility is to pursue price stability. It uses monetary-policy instruments, including decisions on the Base Rate, open-market operations, reserve requirements, and lending facilities, to influence financial conditions and inflation. Since the adoption of an inflation-targeting framework, the Monetary Policy Board has played the central role in setting the policy stance. The bank also monitors economic growth, employment, household and corporate debt, exchange-rate conditions, housing-market risks, and global financial developments when assessing policy. As the sole issuer of banknotes and coins in South Korea, the BOK manages the currency system and helps maintain confidence in the won. It supplies cash to the financial system, oversees the quality and security of circulating currency, and conducts research on payment and settlement developments. Its responsibilities also include operating or supporting important financial-market infrastructure and helping preserve the stability of the broader financial system in cooperation with other Korean authorities. The institution publishes a wide range of economic and financial information. These outputs include monetary-policy decisions, inflation and economic outlook material, balance-of-payments data, national accounts and financial-stability assessments. The BOK is consequently an important public source for information used by governments, businesses, banks, investors, researchers, and international organizations. The bank has had to respond to major changes in South Korea's economic environment, including rapid industrialization, the 1997 Asian financial crisis, the 2008 global financial crisis, the COVID-19 shock, supply-chain disruptions, and the inflation and interest-rate pressures that followed the pandemic. During such periods, it has combined conventional rate policy with liquidity operations, market communication, and cooperation with domestic and international authorities. The BOK is not a consumer-facing commercial bank. It does not compete with retail banks through ordinary deposit, mortgage, or credit-card products. Its institutional positioning is that of a public monetary authority: independent in the execution of its statutory functions, accountable under Korean law, and integrated into the international central-banking system through relationships with institutions such as the Bank for International Settlements, the International Monetary Fund, and other central banks. Its current governor is Rhee Chang-yong, who took office in 2022.

The Bank of Korea was created by legislation enacted in 1950 and began operations on 12 June of that year. It replaced the colonial-era Bank of Chōsen and was given responsibility for monetary, currency, credit, banking, and foreign-exchange matters. The timing was extraordinarily difficult: the Korean War began less than two weeks after its establishment. The institution moved its headquarters away from Seoul several times, managed wartime liquidity and currency problems, and imposed withdrawal limits to reduce the risk of a banking panic. It also arranged the movement and safeguarding of monetary reserves and participated in the financial arrangements that accompanied South Korea’s entry into major international financial institutions in 1955. Postwar policy was dominated by reconstruction and inflation control. The creation of the Korea Development Bank in 1954 introduced an institutional competitor in development finance, but the Bank of Korea continued to influence credit allocation through reserve requirements, loan ceilings, rediscount policy, lending priorities, and approval requirements. High inflation, foreign-exchange shortages, dependence on aid, and agricultural price volatility repeatedly required adjustments to monetary and exchange-rate policy. The bank’s institutional autonomy was limited as the government took a more direct role in directing commercial banks and financing economic development. The political changes of 1960 and 1961 produced major shifts in fiscal and monetary administration. After the May 16 coup, the government expanded its influence over the financial system and reduced the policymaking authority of the bank’s Monetary Policy Committee. The bank nevertheless remained central to the first Five-Year Economic Development Plan, the management of foreign exchange, and the stabilization of the banking system. The hwan was replaced by the won in 1962. Exchange-rate adjustments, reserve changes, credit restrictions, and interest-rate reforms were used as the economy moved toward export-led industrialization. Private regional banks began to re-emerge during the latter part of the decade. In the 1970s, oil shocks and accelerating industrial investment produced inflation and external imbalances. The financial system was used to support heavy and chemical industries, export activity, and national investment programs. Emergency economic measures and directed-credit arrangements constrained the bank’s ability to operate as an independent inflation-targeting institution, but it remained an important operational arm of macroeconomic management. The 1980s brought slower growth after the second oil shock, currency depreciation, and a period of high inflation. Subsequent monetary and fiscal restraint helped restore more stable conditions. At the same time, capital-market internationalization and the expansion of non-bank financial institutions began to diversify the financial system. The 1990s saw wider financial liberalization, including changes affecting interest rates, foreign investment, securities markets, and overseas transactions. These reforms increased market integration but also exposed weaknesses in corporate finance and banking. The 1997 Asian financial crisis caused severe liquidity shortages and a wave of corporate and financial-sector failures. The Bank of Korea participated in emergency stabilization and restructuring measures while South Korea received international assistance. Banks were recapitalized, non-performing assets were addressed, and financial institutions were reorganized. After 1999, deregulated credit-card lending and abundant liquidity contributed to rapid household-credit growth. The 2003 SK Global accounting scandal intensified concerns about market liquidity and financial contagion; the Bank of Korea responded with short-term liquidity operations. Housing prices also became an increasingly important monetary and financial-stability issue. During the 2008 global crisis, the bank reduced its policy rate and supplied liquidity. In the 2010s and 2020s, its policy challenges included low inflation at various points, household indebtedness, property-market risks, external shocks, pandemic-era disruptions, and the need to balance price stability against growth and financial stability. The bank continues to operate as South Korea’s monetary authority, currency issuer, reserve manager, payment-system institution, and source of economic research and statistics. The Bank of Korea was established in 1950 under the Bank of Korea Act, shortly after the founding of the Republic of Korea. It succeeded earlier monetary and financial arrangements and was designed as the country's central monetary institution. Its original responsibilities included issuing currency, conducting banking operations for the government, and supporting the stability of the financial system. The Korean War began soon after the bank was founded, placing extraordinary demands on currency management, public finance, and financial administration. In the following decades, the BOK operated within a highly state-directed development model. South Korea's rapid industrialization required close coordination among the government, commercial banks, and monetary authorities, while the bank also managed the circulation of the won and supplied economic information for national planning. The institution's legal framework and policy role changed over time as Korea's financial system developed. Reforms strengthened the formal emphasis on price stability and gave the Monetary Policy Board a more prominent role in monetary-policy decisions. The BOK's responsibilities expanded beyond currency issuance and traditional central-bank banking to include financial-market monitoring, payment and settlement oversight, economic research, and financial-stability analysis. The 1997 Asian financial crisis was a major turning point for South Korea's financial institutions and macroeconomic policy. The crisis exposed vulnerabilities involving foreign-currency liquidity, corporate leverage, and the banking system. In the years that followed, the BOK operated in a more internationally integrated financial environment and placed greater attention on market confidence, external accounts, foreign-exchange conditions, and systemic risk. During the 2008 global financial crisis, the bank used interest-rate reductions and liquidity measures to support financial-market functioning and the wider economy. It subsequently worked in an environment characterized by low global interest rates, volatile capital flows, changing household debt conditions, and periodic concerns about property and financial-system risks. The BOK adopted inflation targeting as the central framework for its monetary policy. Under this approach, policy decisions are made with reference to the medium-term inflation objective while also considering growth, employment, financial stability, exchange rates, and international conditions. The Base Rate became the institution's most visible policy instrument, although open-market operations and other facilities remain important parts of its toolkit. The COVID-19 pandemic created another exceptional challenge. In 2020, the BOK lowered its policy rate and implemented measures intended to stabilize markets and support liquidity. In the subsequent recovery, supply disruptions, energy and food-price increases, stronger global inflation, and rapid tightening by major central banks led to a reversal of the policy environment. The BOK raised rates during 2021 and 2022 as it sought to contain inflation and manage financial imbalances. In parallel with its traditional duties, the bank has developed work on payment innovation and central bank digital currency. Its research and pilot activities have examined whether a digital form of the won could be technically feasible and how such an instrument might interact with existing payment systems, privacy requirements, financial institutions, and monetary policy. The BOK also continues to publish economic statistics, research, monetary-policy communications, and financial-stability assessments for domestic and international users. Today, the Bank of Korea remains South Korea's central bank and official currency issuer. It is a public institution with a national mandate, rather than a commercial financial-services brand. Its institutional identity rests on monetary credibility, economic analysis, financial-system resilience, secure payment infrastructure, and public communication. After 1999, deregulated credit-card lending and abundant liquidity contributed to rapid household-credit growth. The 2003 SK Global accounting scandal intensified concerns about market liquidity and financial contagion; the Bank of Korea responded with short-term liquidity operations. Housing prices also became an increasingly important monetary and financial-stability issue. During the 2008 global crisis, the bank reduced its policy rate and supplied liquidity. In the 2010s and 2020s, its policy challenges included low inflation at various points, household indebtedness, property-market risks, external shocks, pandemic-era disruptions, and the need to balance price stability against growth and financial stability. The bank adopted inflation targeting as the central framework for monetary policy, with the Base Rate as its most visible instrument. In 2020, the BOK lowered its policy rate and implemented measures to stabilize markets and support liquidity during the COVID-19 shock; in the subsequent recovery, supply disruptions, energy and food-price increases, stronger global inflation, and rapid tightening by major central banks led to a reversal of the policy environment, and the BOK raised rates during 2021 and 2022. In parallel with its traditional duties, the bank has developed work on payment innovation and central bank digital currency, examining whether a digital form of the won could be technically feasible and how such an instrument might interact with existing payment systems, privacy requirements, financial institutions, and monetary policy. The bank continues to operate as South Korea's monetary authority, currency issuer, reserve manager, payment-system institution, and source of economic research and statistics.

• 2022

  Rhee Chang-yong becomes governor

  [4]Bank of Korea: Governorsbok.or.kr

  Rhee Chang-yong took office as governor of the Bank of Korea.

• 2021

  Start of policy normalization

  [9]Pandemic policy responsebok.or.kr

  The BOK began raising its policy rate as the recovery strengthened and inflation and financial-imbalance risks increased.

• 2020

  Pandemic policy response

  [9]Pandemic policy responsebok.or.kr

  The bank cut its Base Rate and introduced measures to support liquidity and market stability during the COVID-19 shock.

• 2008

  Response to the global financial crisis

  [1]Bank of Koreaen.wikipedia.org

  The bank lowered its base rate and injected liquidity as international credit markets came under severe pressure. The BOK used rate reductions and liquidity operations as global market stress affected Korea's economy and financial markets.

• 2003

  Liquidity response to the SK Global shock

  [1]Bank of Koreaen.wikipedia.org

  The bank used repurchase-agreement operations to limit the spread of market stress after the SK Global accounting scandal.

• 1997

  Asian financial crisis

  [1]Bank of Koreaen.wikipedia.org

  The bank supported emergency stabilization and financial restructuring as South Korea faced a major liquidity and banking crisis. The Korean financial system faced a severe external-liquidity and banking crisis, reshaping monetary, financial, and regulatory policy.

• 1965

  Exchange-rate and interest-rate adjustment

  [1]Bank of Koreaen.wikipedia.org

  A floating exchange-rate regime and higher interest rates were used amid balance-of-payments pressures and an effort to support exports.

• 1962

  Hwan replaced by the won

  [1]Bank of Koreaen.wikipedia.org

  South Korea replaced the hwan with the won at a conversion rate of ten hwan to one won.

• 1961

  Greater state direction of monetary and banking policy

  [1]Bank of Koreaen.wikipedia.org

  Following the May 16 coup, the government expanded its control over commercial banks and reduced the independent authority of the Monetary Policy Committee.

• 1955

  Participation in international financial institutions

  [1]Bank of Koreaen.wikipedia.org

  The bank helped arrange reserves and financial resources associated with South Korea's entry into the IMF and the International Bank for Reconstruction and Development.

• 1950

  Bank of Korea established

  [1]Bank of Koreaen.wikipedia.org

  The Bank of Korea Act created the central bank, which began operations in Seoul on 12 June and assumed the functions of the liquidated Bank of Chōsen.

• 1950

  Wartime relocation and emergency monetary administration

  [1]Bank of Koreaen.wikipedia.org

  The Korean War forced the bank to relocate its head office and manage currency circulation, liquidity restrictions, and emergency financial conditions.

Public central bank and monetary authority focused on price stability, currency issuance, financial stability, payment systems, and authoritative economic information.

• Monetary policy · 1950

  Base Rate and monetary-policy operations

  The Bank of Korea uses the Base Rate and associated open-market, lending, reserve, and liquidity instruments to influence short-term interest rates, credit conditions, inflation, and economic activity. Monetary-policy decisions are made by the Monetary Policy Board within the framework of the bank's price-stability mandate.

• Currency issuance · 1950

  South Korean won currency

  The bank has the exclusive institutional role of issuing South Korea's legal-tender banknotes and coins. Currency issuance includes designing, producing, distributing, and maintaining the quality and security of notes and coins used in the Korean economy.

• Financial infrastructure · 1950

  Payment and settlement systems

  The Bank of Korea operates and oversees core payment and settlement infrastructure and supports the safe functioning of domestic financial transactions. This role includes monitoring systemic payment risks and improving the resilience and efficiency of settlement arrangements.

• Reserve management · 1950

  Foreign-exchange reserve management

  The bank manages South Korea's official foreign-exchange reserves and conducts related foreign-exchange operations. These functions support external financial resilience, market confidence, and the country's ability to respond to balance-of-payments or liquidity pressures.

• Public information · 1950

  Economic research and statistics

  The bank produces economic analysis, monetary and financial statistics, national accounts-related data, and policy publications. These outputs inform the Monetary Policy Board, government institutions, financial markets, researchers, and the wider public. The bank produces national economic and financial statistics, research publications, forecasts, monetary-policy reports, and financial-stability analysis used by public institutions, markets, researchers, and international organizations.

• Central-bank policy · 1950

  Monetary policy

  The BOK sets the Base Rate through its Monetary Policy Board and uses open-market operations, reserve-policy tools, lending facilities, and communication to influence inflation, economic activity, liquidity, and financial conditions.

• Currency issuance · 1950

  South Korean banknotes and coins

  The BOK is the official issuer of South Korea's banknotes and coins. Its currency responsibilities include supplying cash, maintaining currency quality and security, and supporting public confidence in the won.

• Payment innovation · 2021

  Central bank digital currency research

  The BOK has conducted technical experiments and pilot work on a possible digital form of the won, examining payment functionality, system architecture, privacy, and the relationship between digital central-bank money and financial institutions.

• 2003

  SK Global accounting scandal and market-liquidity stress

  The disclosure of accounting irregularities at SK Global contributed to concerns about credit markets and financial contagion. The Bank of Korea responded with short-term liquidity operations intended to prevent the shock from spreading through the financial system.

  Source

Read more

• 2021

  Beginning of post-pandemic rate increasesPrice change

  Background

  Economic recovery, rising inflation, household debt, and property-market risks prompted a reassessment of the exceptionally accommodative policy stance.

  Action taken

  The Monetary Policy Board began raising the Base Rate in 2021.

  Aftermath

  The tightening cycle continued into 2022 as global inflation and interest-rate pressures intensified.

  Source

• 2021

  Central bank digital currency pilotProduct launch

  Background

  Changes in payment technology and the growth of private digital-payment instruments led the bank to study the possible future role of central-bank digital money.

  Action taken

  The BOK launched a staged pilot and research program for a digital won concept.

  Aftermath

  The work remained exploratory and focused on technical and policy testing rather than the launch of a generally available retail digital currency.

  Source

• 2020

  Pandemic monetary and liquidity supportStrategy

  Background

  The COVID-19 outbreak created an abrupt economic contraction, market volatility, and heightened demand for liquidity.

  Action taken

  The BOK reduced its Base Rate and used market-support and liquidity measures to help stabilize financial conditions.

  Aftermath

  Policy remained accommodative during the initial pandemic shock before the bank began tightening as inflation and financial imbalances became more prominent.

  Source

• 2008

  Crisis-era rate reduction and liquidity supportStrategy

  Background

  The global financial crisis created severe stress in international credit and funding markets.

  Action taken

  The bank lowered its base rate and injected liquidity into the financial system.

  Aftermath

  The measures supported domestic market liquidity and formed part of South Korea's broader crisis response.

  Source

• 2003

  Emergency repurchase-agreement liquidity operationOther

  Background

  The SK Global accounting scandal and related market concerns created a risk that liquidity problems could spread across the financial system.

  Action taken

  The Bank of Korea launched a short-term liquidity operation through repurchase agreements, reported in the reference material as amounting to two trillion won.

  Aftermath

  The measure was intended to contain contagion and support orderly functioning of the financial market.

  Liquidity operation. Two trillion won (2003)

  Source

1. 1Bank of Koreaen.wikipedia.org
2. 2Bank of Korea official websitebok.or.kr
3. 3Bank of Korea: About the Bankbok.or.kr
4. 4Bank of Korea: Governorsbok.or.kr
5. 5Bank of Korea: Monetary Policybok.or.kr
6. 6Bank of Korea: Central Bank Digital Currencybok.or.kr
7. 7International Monetary Fund: Republic of Korea and the Asian financial crisisimf.org
8. 8https://www.bok.or.kr/eng/bok.or.kr
9. 9Pandemic policy responsebok.or.kr