BOK Consulted Government Before Dropping Foreign Reserve Rankings, Documents Show

▲ US Dollars

It has been revealed that the Bank of Korea (BOK) exchanged opinions with the government before recently deciding to make its international foreign exchange reserve rankings private.

While the BOK stated that it decided to scrap the rankings because they carry little significant meaning, controversy persists as the decision came after the country experienced an unusual and steep decline in its ranking earlier this year.

According to parliamentary audit data submitted by the BOK International Department to Representative Lee Jong-wook of the People Power Party on the 30th, the central bank consulted with the Ministry of Economy and Finance before excluding the international ranking table from its "Foreign Exchange Reserves at the End of August" press release.

The BOK stated, "We routinely hold working-level consultations with the Ministry of Economy and Finance, and we exchanged opinions with the ministry in advance regarding the removal of the ranking table from this press release."

However, it added that no official meetings with a documented record were held.

This means the discussions were strictly "unofficial."

"We did not hold separate official internal or external meetings to discuss the removal of the rankings," the BOK explained, adding, "This was because a consensus had already formed within the BOK and the Ministry of Economy and Finance over a considerable period."

It emphasized, "Foreign exchange reserve rankings are not official statistical indicators but merely supplementary tables. The decision not to include this ranking table in the press release was made at the discretion of the department head (the head of the BOK International Department)."

Previously, in its foreign exchange reserves press release published on the 3rd, the BOK International Department dropped the country-by-country foreign exchange reserve rankings that it had provided every month, without any specific explanation.

It was the first time in 25 years and 6 months—since the monthly data's introduction at the end of February 2001—that the BOK omitted foreign exchange reserve rankings as a separate item in its monthly data.

Although foreign exchange reserves themselves increased by a record margin last month, controversy arose over the background of the omission due to the declining rankings earlier this year.

According to time-series data submitted by the BOK to Representative Lee Jong-wook's office, South Korea's foreign exchange reserve ranking dropped four notches over a five-month period, falling from 9th globally at the end of December last year to 10th at the end of January, 12th at the end of February, and 13th at the end of May this year.

This marked an unusual downward trend compared to the preceding five-year period from January 2020 to February of last year, during which the country consistently maintained the 8th or 9th spot.

The decline was attributed to the BOK tapping into its foreign exchange reserves to implement market stabilization measures as the won-dollar exchange rate surged to its highest level since the global financial crisis earlier this year.

However, the country climbed back to 10th in the world as of the end of June, and while the ranking for the end of July was not made public, it is reported to have maintained a similar standing to the previous month.

Amid controversy following the removal of the rankings, the BOK issued an explanatory press reference on the same day, stating, "As foreign exchange reserve rankings frequently fluctuated, interpretations diverging from economic fundamentals occurred frequently, and we determined that a correction was necessary."

This was interpreted as an intention to fundamentally cut off "unnecessary" disputes by no longer providing the baseline data.

At the time, the BOK countered by saying, "Foreign exchange reserve rankings are already publicly available data that statistics users can freely search and check."

However, critics repeatedly pointed out that it is not easy for the general public to grasp the rankings at a glance, as it requires individually searching and comparing baseline data provided by the International Monetary Fund (IMF) or central banks of various countries.

In the National Assembly, Representative Park Soo-young of the People Power Party even initiated a representative-proposed amendment to the Bank of Korea Act to make the monthly publication of foreign exchange reserve rankings mandatory.

The BOK maintains its existing stance.

It also reported to Representative Lee Jong-wook, "We have no plans to re-include international foreign exchange reserve rankings in future press releases."

It reiterated, "If these figures continue to be included in press releases, simple fluctuations in foreign exchange reserve rankings could be misconstrued as changes in the fundamentals of the external sector."

Separately, supplementary measures are belatedly under consideration.

The BOK acknowledged, "While the IMF discloses foreign exchange reserve statistics, Taiwan is not an IMF member country, so the IMF does not provide statistics for it. Furthermore, the public disclosure dates of various countries differ, and disclosures can be delayed due to individual national circumstances."

It added, "Users can also conveniently check major countries' foreign exchange reserve statistics through the BOK Economic Statistics System (ECOS)," and stated, "We are preparing measures to expand the list of acquired countries, including Taiwan, for the convenience of information users."

(Photo: Yonhap News)

※