BOK celebrates 73rd anniversary, preps for future

Bank of Korea Gov. Rhee Chang-yong gives an address celebrating the 73rd anniversary of the central bank in central Seoul on Monday. [BOK]

The Bank of Korea (BOK) raised the need to improve the financial system in tandem with the rapid growth of non-bank financial companies.

BOK Gov. Rhee Chang-yong said on Monday that supervision over these companies needs to be strengthened amid their rapid growth.

“The proportion of deposits at non-bank financial institutions surpassed that of banks in the 2000s, and their connection has strengthened,” Rhee said in an address celebrating the institution's 73rd anniversary in central Seoul.

Systematic complexity has made it difficult for the central bank to stabilize the overall financial system, but Rhee added policy coordination among regulators and systematic improvements are some measures to stabilize the financial market.

He also noted the need to prepare for the IT era.

The central bank should prepare itself for emergencies in the new environment, as evidenced by the massive amount of customer withdrawals seen at Silicon Valley Bank in March.

Rhee said last month that the speed of massive customer withdrawals could be fast in Korea, if it occurs, due to the country's advanced digital banking network.

The bank is also preparing for the usage of ChatGPT and the adoption of the Central Bank Digital Currency in line with digitization.

He also addressed the weak property market and lingering inflation.

“The weakness in the housing market is recently showing signs of easing, but risks in the finance sector need to be noted due to the rise of delinquency rate for property loans.”

Gradually deleveraging household loans in partnership with related agencies in the mid to long term is part of the solution, Rhee added.

Household loans rose for the second consecutive month in May, the steepest increase in 19 months. They jumped more than 4 trillion won ($3.1 billion), putting the total balance at 1,056.4 trillion won.

The deceleration of core inflation remains slow compared to consumer prices which fell to 3.3 percent last month from a 6.3 percent peak last July. Core inflation, excluding volatile food and energy prices, inched down to 3.9 percent in May after stubbornly staying at 4.0 percent for two consecutive months through April.

The central bank will take into consideration downside risks for growth and changes in monetary policy in key countries, including the U.S. Fed, said Rhee.

The next year will be “a period where changes are even more desperately needed” in terms of policy and internal management, he concluded.

BY JIN MIN-JI [jin.minji@joongang.co.kr]