The Bank of Korea was established on June 12, 1950 under the Bank of Korea Act. Following liberation on August 15, 1945, the Korean economy was plunged into turmoil. Tackling the severe inflation and financial disorder brought about by an acute shortage of resources and the division of the country along the 38th parallel was the immediate priority. In this situation, discussions raged across the country on establishing a central bank for the Republic of Korea and Dr. A. I. Bloomfield, dispatched from the Federal Reserve Bank of New York, drafted the Bank of Korea Act. Based on this draft, the Bank of Korea Act was passed in May 1950 and the Bank launched its operations as a central bank on June 12, 1950. It was given a wide range of functions in relation to monetary & financial policy, bank supervision, and foreign exchange policy. -------------------------------------------------
The primary purpose of the Bank is to pursue price stability. Under the Bank of Korea Act (Article 1), the primary purpose of the Bank is pursuing price stability so as to contribute to the sound development of the national economy. The purchasing power of money depends on prices. When prices rise, the same amount of money buys less than before. Therefore, it is naturally the task of a central bank to safeguard the value of the money by keeping inflation low. Prices are influenced by various factors such as corporate investment, household consumption and international prices of raw materials. Meanwhile, among the various policy instruments to bring about price stability, the monetary policy of a central bank, which adjusts the quantity of money in circulation, is the most effective. For these reasons, the responsibility for price stability is given to central banks in most countries. The Bank sets and announces an inflation target for a certain period and strives to meet this target. The 2010–12 target is consumer price inflation of 3.0± 1%. -------------------------------------------------
Monetary Policy Committee
At the apex of the Bank of Korea's organization is the Monetary Policy Committee (Geumnyung Tonghwa Wiwonhoe). The Committee's prime function is the formulation of monetary and credit policies. In addition, the Committee deliberates and resolves on major matters concerning the operations of the Bank of Korea. The Monetary Policy Committee is composed of seven members representing various groups in the national economy: 1) the Governor, ex-officio; 2) the Senior Deputy Governor, ex-officio; 3) one member recommended by the Minister of Strategy and Finance; 4) one member recommended by the Governor; 5) one member recommended by the Chairman of the Financial Services Commission; 6) one member recommended by the Chairman of the Korea Chamber of Commerce & Industry; 7) one member recommended by the Chairman of the Korea Federation of Banks. The members are appointed by the President for four-year terms except the Senior Deputy Governor whose term is three years and are eligible for reappointment. All members serve on a full-time basis and no member may be discharged from office against his will. The Governor serves concurrently as the Chairman of the Committee. Executive and Auditor
The executive of the Bank of Korea consists of the Governor, the Senior Deputy Governor, and five or fewer Deputy Governors. The Governor, appointed by the President on the deliberation of the State Council, represents the Bank. The term of office of the Governor is four years and he or she may be reappointed only once. The Governor conducts policies formulated by the...