Bank of Korea

Overview

The Bank of Korea (BoK) is the central bank of South Korea, established on June 12, 1950, under the Bank of Korea Act (enacted May 5, 1950). As the sole currency issuer and financial system regulator, the BoK serves as the cornerstone of South Korea's monetary and financial stability framework.

The Bank operates under a mandate to:

• Stabilize the value of the national currency (Korean won)

• Promote the soundness of the banking and credit system

• Support sustainable economic development

• Manage the nation's payment and settlement systems

• Preserve and enhance financial stability

The BoK is headquartered at 39 Namdaemun-ro, Jung-gu, Seoul, and operates under the governance structure comprising a Governor, Deputy Governors, and the Monetary Policy Board (7 members).

Current Leadership:

• Governor: Rhee Chang-yong (26th Governor, appointed April 21, 2022)

• Term: April 21, 2022 – April 20, 2026

Governor Rhee is an economist with a doctorate from Harvard University (1989) and previously served as Director of the Asia and Pacific Department at the International Monetary Fund (2014–2022).

Basic Identity

Classification

Inclusion Justification

What This Entity Oversees

Macroprudential Policy Authority

The Bank of Korea is the primary macroprudential authority for South Korea, responsible for identifying and mitigating systemic risks to the financial system. The BoK implements macroprudential policies in coordination with other financial regulators (FSC, FDIC, etc.).

Key Macroprudential Policy Instruments

Loan-to-Value (LTV) Regulations

• Implemented September 2002

• Applies to residential and commercial mortgage lending

• Implemented countercyclically to smooth housing market volatility

• Recently maintained at restrictive levels due to housing market imbalances

Debt-to-Income (DTI) Regulations

• Implemented August 2005

• Limits total debt service relative to borrower income

• Reduces procyclical lending patterns

• Subject to countercyclical adjustments

Loan-to-Deposit (LTD) Ratio Regulation

• Limits the ratio of lending to deposits for individual institutions

• Reduces interconnectedness and wholesale funding dependency

• Addresses procyclicality in bank lending

Foreign Exchange (FX) Macroprudential Measures

• FX macroprudential stability levy on foreign currency positions (temporarily exempted in December 2025)

• Interest on excess reserves for foreign-currency deposits

• Controls capital flow volatility in Korea's highly liberalized capital account

• Manages won exchange rate stability

Current Financial Stability Concerns

As of 2025–2026, the Bank of Korea has identified the following material risks to financial stability:

1. Trade and External Risk: Tariff uncertainties and potential trade disruptions

2. Sectoral Weakness: Prolonged industrial weakness in key export sectors

3. Housing Market Imbalances: Persistent expectations of home price appreciation despite supply constraints

4. Household Debt: Elevated levels of household debt relative to income, particularly mortgage debt

5. Corporate Debt: Manufacturing and export-oriented firms facing profitability pressures

The Bank has emphasized the need for consistent, tight macroprudential policy stance combined with effective government housing supply measures.

Financial Stability Reporting

The Bank of Korea publishes periodic Financial Stability Reports detailing systemic risks, macroprudential policy assessments, and recommended policy adjustments. Requires verification from official sources These reports are available on the BoK website.

Regulatory Powers

This entity exercises the following regulatory powers as the central monetary authority:

Regulatory Role and Function

Legal Foundation

Statutory Framework

The Bank of Korea operates under the Bank of Korea Act, with the most recent comprehensive revision in 2003 and amendments through 2018. The Act provides the Bank with binding legal authority over Korea's financial system and payment infrastructure.

Key Statutory Powers (Post-2003 Revision):

1. Monetary Policy Authority: The BoK is empowered to formulate and execute monetary policy on an inflation-targeting basis, operating with medium-term strategic objectives

2. Currency Issuance: Exclusive authority to issue and manage the Korean won

3. Payment System Oversight: Delegated authority (2003) for holistic management of the nation's payment and settlement systems

4. Financial Stability: Macroprudential policy authority to regulate systemic risk across financial institutions

5. Regulatory Coordination: Authority to supervise and coordinate with other financial regulators

Organizational Structure

• Monetary Policy Board: 7-member board including the Governor, responsible for monetary policy decisions, interest rate setting, and broader economic policy coordination

• Executive Structure: Governor, Deputy Governors, and specialized divisions covering monetary policy, financial stability, payment systems, and international cooperation

• Regional Offices: Multiple branches throughout South Korea to support operational functions

Licensing and Authorization Relevance

Project Hangang: Wholesale CBDC and Deposit Tokens

The Bank of Korea is advancing a major digital currency initiative called Project Hangang, designed to modernize Korea's payment and settlement infrastructure through blockchain-based wholesale CBDC and commercial bank-issued deposit tokens.

Project Architecture

Wholesale Layer: Central Bank Digital Currency (CBDC) for interbank settlement

• Enables high-speed, low-cost settlement

• Reduces settlement risk and operational complexity

• Positions for international payment integration

Commercial Layer: Bank-issued deposit tokens

• Won-pegged stablecoins issued by participating commercial banks

• Backed by CBDC reserves held at the Bank of Korea

• Enables retail transactions while maintaining central bank oversight

Current Phase (Phase 2) – Real-World Pilot

Launch Timeline: Phase 2 began March 2026

Participating Banks (9 total):

• KB Kookmin

• Shinhan Bank

• Woori Bank

• Hana Bank

• NH Nonghyup Bank

• IBK Industrial Bank

• BNK Busan Bank

• Kyongnam Bank (Phase 2 addition)

• iM Bank (Phase 2 addition)

Pilot Capabilities:

• Peer-to-peer (P2P) transfers between customers (Phase 1 enhancement)

• Government subsidy disbursements

• Large-scale corporate and merchant payments

• Transaction cost reduction for small merchants (credit card fee elimination)

• Consumer-to-business and business-to-consumer transactions

Use Cases in Phase 2

Government Subsidy Distribution: Testing direct disbursement of government subsidies in digital form, starting with electric vehicle (EV) charging infrastructure subsidies in H1 2026.

Merchant Payment Integration: Addressing merchant pain points by reducing credit card processing fees, particularly benefiting small merchants and SMEs.

Consumer Transfers: Enabling fast, low-cost transfers between individuals and businesses without traditional banking intermediation.

Strategic Positioning

The Bank of Korea positions deposit tokens as an "intermediate stage between retail CBDC and private stablecoins," allowing:

• Controlled private sector participation

• Central bank oversight and monetary policy integration

• Consumer protection through regulatory framework

• Potential future integration with international payment systems

Regulatory Context

The broader deployment of KRW-pegged stablecoins and digital currency infrastructure in Korea is governed by the Digital Asset Basic Act, which remains under development with ongoing disputes regarding stablecoin issuance authority. The BoK's wholesale CBDC and deposit token framework is designed to operate in parallel with evolving stablecoin regulation.

Future Roadmap

Requires verification from official sources Planned future phases may include:

• Expansion of deposit token participation to additional commercial banks

• Integration with real-time gross settlement (RTGS) infrastructure

• Potential retail CBDC deployment (subject to policy decisions)

• Cross-border payment testing with other central banks

Payments and Money Movement Relevance

Regulatory Responsibility

Under the 2003 revision of the Bank of Korea Act, the BoK received explicit delegated authority for the operation and comprehensive oversight of South Korea's payment and settlement systems. This mandate includes:

• Design and operation of critical payment infrastructure

• Establishment of interbank settlement standards and protocols

• Risk management in payment systems

• Development of clearing and settlement mechanisms

• Participation in international payment system standards

Core Payment Systems Operated by BoK

BOK-Wire+ (Bank of Korea Financial Wire Network)

• Large-value payment system: hybrid settlement system for high-value interbank transactions

• Critical infrastructure for final settlement using central bank reserve accounts

• Operates real-time gross settlement (RTGS) for same-day transactions

• Handles billions of KRW in daily settlement volume

Other Payment Infrastructure:

• Retail payment systems (check clearing, electronic funds transfers)

• Securities settlement coordination

• Currency settlement and foreign exchange transaction processing

• Emergency liquidity facilities for payment system participants

Settlement Services

The BoK provides settlement accounts to financial institutions and major market participants, serving as the central counterparty for final settlement of transactions across the Korean financial system. All final settlements are conducted through reserve accounts held at the BoK, ensuring legal certainty and reducing counterparty risk.

Policy Framework

The Bank of Korea conducts monetary policy under an inflation-targeting framework, operating on a medium-term strategic horizon rather than purely cyclical objectives. The framework was formalized in the 2003 revision of the Bank of Korea Act.

Inflation Target: Typically 2.0% annually (subject to Board review)

Policy Instruments:

• Base rate (policy interest rate) set by the Monetary Policy Board

• Open market operations (OMOs) to manage liquidity

• Reserve requirement adjustments (as needed)

• Lender-of-last-resort facilities for financial stability

Monetary Policy Board

The 7-member Monetary Policy Board meets regularly (typically monthly) to:

• Review economic and financial conditions

• Set the Base Rate (official policy rate)

• Approve monetary policy direction

• Coordinate with government fiscal policy authorities

Board composition includes the Governor, Deputy Governors, and external members with expertise in economics and finance.

Recent Policy Actions

Requires verification from official sources Recent statements from Governor Rhee (2025) indicate that monetary policy decisions depend on incoming economic data, with attention to external risks including trade policy, industrial weakness, and financial stability considerations.

Payment Systems Governed or Overseen

The Bank of Korea operates and/or oversees the national payment and settlement infrastructure of South Korea. As of 2026, the key payment systems include:

Core Infrastructure Systems

Real-Time and Mobile Payment Platforms

National QR Standard

Unified National QR Code Standard:

• Issued: January 2025 (Final Technical Specification - Financial Services Commission)

• Coverage: Mandated compatibility across Kakao Pay, Naver Pay, Toss, and card-issuer wallets

• Purpose: Streamline merchant acceptance; reduce fragmentation of QR payment standards

Market Performance (H1 2024 - 2025)

Mobile Payment Metrics:

• Daily Wallet Transactions: 29.71 million (H1 2024)

• Market Size (2025): USD 44.38 billion

• Projected 2026 Size: USD 48.25 billion

• CAGR (2025-2031): 8.72%

Real-Time Payment Market:

• 2026 Market Size: USD 2.35 billion

• Projected Growth Rate: CAGR 37.68%

• 2031 Projection: USD 11.65 billion

Buy-Now-Pay-Later (BNPL) Market

Market Size and Growth:

• 2026 Market Value: USD 2.85 billion investment opportunity

• Projected 2031 Size: USD 2.85 billion+ (significant expansion)

• Key Players: Naver Pay, Kakao Pay (post-Finnq), Toss Pay, Hyundai Card, Samsung Card

Recent Development:

• Kakao Pay Finnq Acquisition (October 2025): KRW 620 billion (USD 470 million)

• Strategic Goal: Integrate installment financing into super-app; expand credit services to younger consumers and SMEs

Connected Vehicle Payment Integration

Visa/SK Telecom eSIM Wallet (October 2025):

• Technology: eSIM-based tokenized mobile wallet for connected cars

• Vehicle Integration: Hyundai 2026 models

• Use Cases: Fuel purchases, toll payments, parking fees

• Authorization: In-vehicle dashboard authorization system

• Impact: Extends payment ecosystem beyond smartphones to connected vehicle infrastructure

Settlement and Clearing Infrastructure

BOK-Wire+ Specifications:

• Settlement Type: Real-time gross settlement

• Participants: All licensed banks and designated financial institutions

• Settlement Time: Approximately 60 seconds per transaction

• Operation: 24-hour settlement capability; integrates with Project Hangang CBDC infrastructure

HOFINET:

• Function: Interbank payment routing and message switching

• Integration: Routes transactions to BOK-Wire+ for final settlement

• Coverage: Domestic interbank payment network

Digital Currency and Innovation

Project Hangang (Wholesale CBDC and Deposit Tokens):

• Phase 2 Launch: March 2026

• Participants: 11 banks total (9 from Phase 1, plus Kyongnam Bank and iM Bank added in Phase 2)

• Capabilities: P2P transfers, government subsidy disbursements, corporate payments, merchant integration

• Use Cases Tested: Electric vehicle charging subsidies (H1 2026), small merchant credit card fee reduction

Deposit Tokens Strategy:

• Won-pegged stablecoins issued by participating commercial banks

• Backed by CBDC reserves held at Bank of Korea

• Enables retail transactions while maintaining central bank oversight

• Intermediate stage between retail CBDC and private stablecoins

Regulatory Framework

Legislation:

• Bank of Korea Act (revised 2003, amendments through 2018): Primary authority for payment system regulation

• Digital Asset Basic Act: Evolving framework for stablecoin issuance authority and crypto regulation

Settlement Finality:

Bank of Korea establishes binding rules for payment finality and settlement to ensure legal certainty and minimize systemic risk in the payment system.

Cross-Border Payment Integration

Future Regulatory and Market Developments

Scheduled Initiatives (2026+):

• Project Hangang Phase 2 evaluation and potential Phase 3 expansion

• Digital Asset Basic Act finalization (stablecoin regulation)

• Retail CBDC policy decisions

• Cross-border payment system testing

• Enhanced cybersecurity standards for digital payment providers

Market Expansion (2026-2031):

• Real-time payments CAGR: 37.68% projected

• BNPL market expansion: significant investment growth

• Connected vehicle payment integration expansion

• Super-app payment consolidation

Sources:

• South Korea Real-Time Payments Market (2026-2031)

• South Korea Prepaid Card and Digital Wallet Report (Feb 2026)

• South Korea BNPL Market Report (Jan 2026)

• Bank of Korea Official Website

• Bank of Korea Project Hangang Information

• South Korea Mobile Payment Trends (2025)

Relationship to Other Regulators

Multilateral Engagements

The Bank of Korea actively participates in major international financial forums and central banking networks:

Bank for International Settlements (BIS)

• Member of the BIS and host to the BIS Asian Office in Hong Kong

• Participant in BIS committees addressing payment systems, financial stability, and monetary policy

Emerging Markets and East Asia-Pacific (EMEAP) Group

• Member of the EMEAP Central Banks Group (13 member central banks)

• Chairmanship and leadership roles in EMEAP working groups

• Coordination on regional financial stability issues

International Monetary Fund (IMF)

• Regular Article IV consultation engagement

• Macroprudential policy collaboration

• Currency and reserve management coordination

G20 Financial Stability Board (FSB)

• Participation in international regulatory standard-setting

• Contribution to macroprudential policy development

Bilateral Central Bank Relationships

The BoK maintains bilateral relationships with major central banks (Federal Reserve, ECB, People's Bank of China, Bank of Japan, etc.) for:

• Currency swap arrangements for liquidity support

• Monetary policy coordination and information sharing

• Payment system interoperability discussions

• CBDC and digital currency cooperation

Cross-Border Payment Projects

Requires verification from official sources The Bank of Korea is engaged in discussions regarding:

• CBDC interoperability frameworks

• Cross-border payment efficiency improvements

• Regional monetary cooperation initiatives

Geography and Jurisdiction Notes

Important Departments and Divisions

Key Public Resources

Headquarters and Main Inquiry

Bank of Korea

39 Namdaemun-ro, Jung-gu, Seoul 04531, Republic of Korea

Phone: +82-2-759-4114

Official Website

English: https://www.bok.or.kr/eng/main/main.do

Korean: https://www.bok.or.kr/

Office Locations

The Bank maintains the Head Office in Seoul with branch offices throughout South Korea. Contact pages for regional offices are available at:

https://www.bok.or.kr/eng/main/contents.do?menuNo=400247

Key Information Resources

Monetary Policy and Economic Data

https://www.bok.or.kr/eng/main/contents.do?menuNo=400045

Payment and Settlement Systems

https://www.bok.or.kr/eng/main/contents.do?menuNo=400045

Financial Stability Reports and Macroprudential Policy

https://www.bok.or.kr/eng/main/contents.do?menuNo=400043

Bank of Korea Act and Legal Documents

https://www.bok.or.kr/eng/bbs/E0000824/list.do?menuNo=400261

News and Publications

https://www.bok.or.kr/eng/main/contents.do?menuNo=400074

Executive Contact

Governor: Rhee Chang-yong

Position: 26th Governor of the Bank of Korea

Term: April 21, 2022 – April 20, 2026

Background: Ph.D. Economics (Harvard University, 1989); former IMF Director of Asia and Pacific Department

Governor Rhee's public statements and speeches are available at:

https://www.bok.or.kr/eng/main/contents.do?menuNo=400074

Notes on Naming and Language