The BOK's Role in Ensuring Financial Stability

Monitoring the Financial System and Evaluating Its Stability

The Bank of Korea monitors the financial system and evaluates its stability. It reviews domestic and overseas economic conditions, analyzes financial market environments and examines the debt servicing capacity of the household and business sectors to get an overall picture of financial institution soundness. The Bank also contributes to maintaining financial stability by identifying and providing potential risk factors in the financial sector, to prevent them from causing financial system unrest.

Analyzing Management Status and Conducting Joint Examinations of Financial Institutions

The Bank of Korea analyzes the management status of financial institutions and evaluates their soundness, based upon information collected from reports and surveys on them, while if necessary conducting joint examinations of these institutions with the Financial Supervisory Service. These efforts enhance the effectiveness of monetary policy and contribute to maintenance of financial system stability by allowing the Bank to more accurately understand business conditions of individual financial institutions and to collect and evaluate various on-site information.

Operating and Supervising the Payment and Settlement Systems

The Bank of Korea operates and oversees the nation's payment and settlement systems to promote their safety and efficiency. In this regard, the Bank is empowered under the Bank of Korea Act to facilitate the operation and oversight of payment and settlement systems, to evaluate them, to make systemic improvements for reducing settlement risks, and to constantly check the business conditions of financial institutions.

Providing Emergency Liquidity Assistance

The Bank of Korea, as the lender of last resort, provides emergency liquidity assistance to financial institutions or markets as necessary, to prevent financial market instability or a temporary liquidity crisis of a certain financial institution from spreading to the entire financial system.

Publishing the Financial Stability Report

The Bank of Korea publishes the Financial Stability Report, which includes an analysis of the current status and potential risks of Korea's financial system and an overall assessment of its stability. The main purpose of the publication is to further strengthen financial system stability, by stimulating market participants' active discussion of a wide range of risk factors in the financial sector under the rapidly changing global financial environment. The Bank began to publish the Financial Stability Report, the first of its kind in Asia, from 2003, and has since then continued to publish it regularly twice a year.