International Organizations & Cooperation

Financial Cooperation with International Financial Institutions

The Bank of Korea aims to achieve full reflection of Korea's positions on major policy issues, by participating in various conferences such as annual meetings held by international financial organizations. It is also responsible for negotiations with such organizations, and invests, contributes and participates in other financial transactions with them. Article 85 of the The Bank of Korea Act stipulates that the Bank of Korea shall represent the Korean government in dealing with international institutions. Based on this law and other related regulations, the Governor of the Bank of Korea represents Korea in the Bank for International Settlements meetings as a Governor and in other international financial meetings as an Alternate Governor.

In addition, the Bank of Korea serves as a deposit point for such international financial institution's assets in Korean Won and other foreign currencies. The Bank of Korea maintains current deposit or call deposit accounts of these organizations, and holds securities acquired by them in Korea.

Korea joined the IMF on August 26, 1955, as the 58th country to enter the Fund, with the aim of procuring funds necessary for its economic development. Upon its accession, Korea's quota in the IMF was SDR 12.5 million, only 0.14% of the total. As Korea's importance in the global community has increased through its economic development, however, by end-September 2021, its quota had increased to SDR 8,582.7 million (1.80% of the total, 16th among all members).

Due to its weak economic condition, for a considerable period of time since its IMF accession in 1955, Korea had been able to avail itself of the Transitional Agreements (Article XIV of the Articles of Agreement), which allow restrictions on payments and transfers for current international transactions. In the mid-1980s, however, when Korea's balance of payments position improved, it eased some foreign exchange regulations related to external transactions. From November 1, 1988, Korea became subject to Article VIII, which prohibits discriminatory or multilateral currency agreements and also prohibits foreign exchange regulation on current international transactions.

In the late-1980s, Korea was then acknowledged for the soundness of its balance of payments and external reserve conditions, as its balance of payments had recorded continual surpluses. In March 1987, Korea was included on the IMF's financial transaction counterparty list. Since then it has been delisted a few times, but has now remained solidly on the list since March 2002.

Korea and the IMF concluded their first stand-by agreement (an agreement through which a country can receive a loan from the IMF on the condition that it comply with policy requirements and implement related programs) in 1965, under which Korea could receive SDR 9.3 million to maintain FX rate stability and make-up for its balance of payments deficits. After that, Korea obtained loans on sixteen occasions, with a total value of U$1.68 billion, until 1987. As its balance of payments improved from 1987, this whole amount had been repaid by 1988. However, when Korea faced financial crisis in late-1997, it signed another stand-by agreement with the IMF, this time worth SDR 15.5 billion. Korea subsequently withdrew SDR 14.41 billion in all, and had repaid the entire amount by August 2001.

Since joining the IMF, Korea has received technical assistance several times in various areas. The technical assistance it has received most recently has addressed the following issues: harmonious operation of monetary and FX policy (1999), methods of statistical measurement and accounting of derivatives (2000), implications of the adoption of financial futures on the FX market and methods of response (2000), foreign reserve risk management (2003), measurement of the appropriate FX rate level (2003), and money market development (2007).

Korea also provides various kinds of resources to IMF. As of February 2024, the Bank of Korea is one of 40 members that have signed New Arrangements to Borrow with the IMF, by which Korea has promised to provide a credit line worth SDR 6,700 million(1.9% of the aggregate commitments from the 40 participating countries) should the international financial system be threatened by a financial crisis of an IMF member. Korea has also committed SDR 4.6 billion (USD 6.5 billion) as of February 2024 to the IMF as part of a bilateral borrowing agreement, which was adopted at the G20 Summit held in Los Cabos, Mexico, in June 2012. The Bank of Korea has also provided SDR 1,000 million for the Fund’s Poverty Reduction and Growth Trust (PRGT), created to facilitate economic growth and to reduce poverty in developing economies, and SDR 1,450 million for the Resilience and Sustainability Trust (RST) established to deal with long-term structural changes, such as climate change.

In accordance with Article IV of the Articles of Agreement, IMF conducts Article IV Consultations with Korea regularly. The Bank of Korea participates in this consultation, and discusses with the IMF mission team Korea' macroeconomic and financial market developments and prospects, and the BOK's implementation of monetary policy.

Along with the World Bank, the IMF has been operating its Financial Sector Assessment Program, in order to strengthen members' resilience against financial crises through determining the soundness, vulnerabilities and risks of their financial institutions and financial markets and helping them build sound financial systems. Korea participates in this program in 2003, 2013, and 2019, consulting with the IMF on its monetary policy, macroeconomic policy, foreign exchange policy, and financial market infrastructure. The IMF has acknowledged Korea's high level of transparency and stability in these areas.

In collaboration with the government, the Bank of Korea represents Korea in various meetings held by the International Monetary Fund and presents Korea's position there. These meetings include the IMF/World Bank Annual Meetings, IMFC meetings held in the spring and autumn. In addition to participating in these official meetings, the Bank of Korea delegations also meet with international financial experts during the periods of these meetings. Through such activities, the Bank of Korea promotes economic diplomacy by making known the current status of the Korean economy and its monetary policies.

The Bank of Korea handles money transactions with the IMF on behalf of the country. After Korea became a member of the IMF in 1955, the Korean government began directly investing (including contributions) in international financial organizations including the IMF. Since revision of the "Act on Joining International Financial Organizations" on November 16, 1971, however, the responsibility for carrying out capital transactions with such organizations has belonged to the Bank of Korea.

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Korea is a member of all organizations that make up the World Bank Group, including the IBRD, IDA, IFC, MIGA and ICSID. On behalf of the Korean government, the Bank of Korea makes payments to these organizations and participates in various financial transactions with them.

From 1962, a few years after Korea became a member of the World Bank Group, it tapped the capital of the International Development Association(IDA), which provides long-term loans at zero interest. From 1968 it also utilized capital of the IBRD, a commercial-based financial institution. In building its key national industries, Korea took full advantage of capital provided by the World Bank Group. As its economic power grew, Korea graduated from the IDA program for the poorest countries in 1974, and later stopped being a beneficiary of financial support from the IBRD in 1995.

In particular, Korea has been actively participating in various World Bank-led development programs for developing countries since the end of the 1970s, when it ceased being a program beneficiary. From the fifth replenishment of IDA capital in 1979, Korea became a donor, contributing to the raising of concessional funds to support developing countries. Korea joined the Consultative Groups on developing countries from 1987 and the syndicate loan project in 1990. From 1993, Korea also started to give to the World Bank's Consultant Trust Fund.

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Korea is a member of several regional multilateral development institutions, including the ADB, AIIB, AfDB / AfDF, EBRD, IDB Group(IDB, IDB Invest, IDB Lab) and CABEI. Korea, currently the eighth-ranked stakeholder in the ADB, is a member of the board of directors and has a considerable influence on the ADB policies. In 1970, Korea hosted the third ADB Annual Meeting in Seoul in 1970 and the 37th meeting on Jeju Island in 2004, and will host the 56th Annual Meeting in Incheon in 2023. In 2015, Korea joined the AIIB, an international organization established by China, as a founding member, and it is expected to play an important role within the organization, securing the fifth largest share among the participating countries. Korea was the first member besides China to host the AIIB Annual Meetings, which was held in Jeju Island in 2017.

From outside of Asia, Korea is also serving as a member of regional multilateral development institutions such as the AfDB/F, EBRD, IDB Group and CABEI, participating in their loan businesses and strengthening cooperation with their members.

Korea hosted the third ADB Annual Meeting in Seoul in 1970, the 37th Annual meeting on Jeju Island in 2004, and the 56th Annual Meeting in Incheon in 2023.

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The Organisation for Economic Co-operation and Development (OECD) was founded in December 1960 as an economic forum of developed

countries to promote economic cooperation among countries in North America and Europe. When it opened its membership to emerging

market economies and “countries in transition” in the 1990s, Korea became a member in December 1996, and as of January 2024 the OECD has a total of 38 members. Today, the OECD serves as a global policy forum where members have broadened discussion to include diverse topics beyond the original aims of economic development, development assistance, and free trade.

As a member of the government delegation, the Bank of Korea participates in major OECD meetings, including the Economic and Development Review Committee (EDRC) and the Economic Policy Committee (EPC), to ensure that Korea's economic developments and policies are reflected accurately in the OECD's Economic Survey.

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Cooperating with International Consultative Bodies

Since the financial crisis that hit emerging markets at the end of the 1990s, a consensus has been formed in the international community that the international financial system needs to be strengthened in order to maximize the benefits of globalization and financial market opening, and to minimize the harmful side effects stemming from rapid capital movements. Furthermore, as the economic importance of emerging market countries has grown, there has been a recognition that advanced countries, emerging market economies and International Financial Institutions need to forge joint responses to efficiently handle issues related to reforming the international financial system. As a result, various consultative bodies, such as the G-20, the Financial Stability Board, ASEAN+3 and the Manila Framework Group, have been newly established. The Bank of Korea participates in meetings of these bodies, together with the Korean government, to share Korea's experiences in overcoming crisis with other countries, and to consult on policy measures. The Bank of Korea is also striving to have Korea's position reflected as much as possible in reforming of the international financial system.

The G-20 (Group of Twenty) is a representative international forum composed of industrialized countries and major emerging market economies, created with the report of the Finance Ministers of the Group of Seven on "Strengthening the International Financial Architecture" in September 1999. Together with the G-7 countries, * G-20 participants include 12 other major economies EU and AU as well as international financial institutions such as the IMF, World Bank and FSB.

* U.S., Japan, Germany, U.K., France, Italy, Canada

** Korea, China, India and Indonesia (Asia); Argentina, Brazil and Mexico (South America); Russia, Turkey and Australia (Europe and Oceania); The Republic of South Africa and Saudi Arabia (Africa and the Mid-East Area)

Discussions in G-20 meetings have centered on ways to facilitate global economic growth, reform financial regulations, and ease global imbalances, based on solid cooperation among member countries. Members have also actively participated in debates on reforming the international tax system in response to taxation issues stemming from digitalization. Efforts have recently been focused on strengthening international cooperation on many issues induced by the COVID-19 pandemic, including debt problems in low-income countries, global health issues, the transition to a low-carbon economy, and responses to climate change risks. The bank of Korea, together with the Korean government, actively participates in G-20 meetings to remain informed about current economic and financial issues and to help strengthen policy coordination across the international community.

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The Financial Stabilitly Board (FSB) is an international body established after the Global Financial Crisis to create a new financial regulatory framework for crisis recovery and prevention. Established as a successor to the Financial Stability Forum (FSF) with a broadened mandate and membership, it coordinates and oversees work among financial authorities, international standard-setting bodies, and international organizations. It monitors financial system vulnerability, and develops and implements regulatory and supervisory policies. As of the end of November 2022, the FSB is represented by 24 financial authorities and 13 international organizations. Korea has actively participated in the Plenary, the Regional Consultative Group for Asia, and other various working groups since it joined in March 2009. The Governor of the Bank of Korea served as the first co-chair of the Regional Consultative Group for Asia from November 2011 to June 2013.

* Argentina, Australia, Brazil, Canada, China, France, Germany, Hong Kong, India, Indonesia, Italy, Japan, Mexico, the Netherlands, Korea, Russia, Saudi Arabia, Singapore, South Africa, Spain, Switzerland, Turkiye, the United Kingdom, and the United States

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ASEAN+3 is a regional consultative forum suggested by China and established in December 1998 upon agreement of Korea, Japan and China with ASEAN, for the purpose of strengthening mutual cooperation within the region on financial issues and enhancing regional abilities to cope with crisis. The 13 members include Korea, China, Japan and the ASEAN countries. **

** Malaysia, Indonesia, Thailand, the Philippines, Laos, Myanmar, Cambodia, Singapore, Vietnam and Brunei

In May 2000, ASEAN+3 adopted the Chiang Mai Initiative for concluding currency swap agreements among member countries to prevent financial crises. Since 2002, the members have focused on research and discussion for the Asian Bond Markets Initiative (ABMI), in recognition of the importance of fostering bond markets in the region to attract the enormous levels of foreign reserve held by Asian countries. In 2019, members set new initiatives for facilitating regional growth and integration as their main tasks, under which they studied and discussed financial digitalization, transition finance, and disaster risks, as of 2022.

Meanwhile, in March 2010, the ASEAN+3 converted the existing CMI bilateral currency swap agreements to a multilateral currency swap agreement, called the Chiang Mai Initiative Multilateralization, in an effort to strengthen the agreement’s legal enforceability, to better prevent regional financial crises, and to facilitate more effective and systematic provision of US dollar liquidity in any event of crisis. The total size of the CMIM was increased to 240 billion dollars after revision of the agreements with effect from July 2014. Korea’s contribution and maximum arrangement amounts stand at 38.4 billion dollars each. In September 2020, the agreement was revised to allow the provision of local currency (LCY) liquidity to member countries, in addition to U.S. dollars, in an attempt to enhance accessbility to the CMIM arrangements and to reduce dependency on the dollar.

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