![The main and annex buildings of the Bank of Korea headquarters in Jung-gu, Seoul. [Herald DB]](https://wimg.heraldcorp.com/news/cms/2026/08/01/news-p.v1.20260710.1e5c21d23a084871ae5c4e4d503d224d_P1.png)
The Bank of Korea monitors household debt and real estate markets as part of its financial stability mandate, but critics say its lack of direct regulatory tools undermines the effectiveness of its policies. Competing interests among financial authorities have made the central bank reluctant to speak out forcefully — raising questions about whether Governor Shin Hyun-song, widely regarded as a leading scholar in macroprudential policy, will move to expand the BOK's role in that area.
In a written response obtained through People Power Party lawmaker Kwon Young-se's office, the BOK sidestepped a direct question about whether it should hold macroprudential regulatory tools of its own.
"In light of future changes in financial conditions, growing domestic and external uncertainty, and the expanding role of non-bank institutions within the financial system, there is a need to consistently improve the relevant regime in a way that shares awareness of financial stability conditions with related agencies and strengthens the effectiveness of macroprudential policy," the BOK said.
As an example of institutional progress, the BOK pointed to the government's plan — announced as part of its second-half 2026 economic growth strategy — to establish a new ministerial- and agency-head-level consultative body on macroprudential policy, bringing together the BOK, the Ministry of Economy and Finance, the Financial Services Commission and the Financial Supervisory Service. The stated aim is to promote macroeconomic and financial and foreign exchange market stability. Even so, the arrangement falls short of directly expanding the BOK's own macroprudential policy role.
The BOK also said it had "continued efforts to maintain financial system stability, including early-warning functions through the Financial Stability Report and the Financial Stability Assessment Report," and that it had "closely monitored household debt and real estate market conditions and worked with related agencies on macroprudential management through participation in various consultative bodies."
Asked about recent instances in which it had requested macroprudential action from other agencies, the BOK offered only a general response. It said it "closely examines and analyzes financial stability conditions and potential risks, issues early warnings on risk factors through the Financial Stability Report and press releases, and presents policy response directions," and that it "participates in various consultative bodies — including the Macroeconomic and Financial Affairs Meeting, the Household Debt Management Council, and the real estate project financing review meeting — to share assessments of household debt and real estate market conditions and work together on macroprudential management."
Calls to strengthen the BOK's macroprudential role have persisted for years. The central bank monitors financial stability conditions including household debt and real estate markets, yet it holds no authority to regulate or control tools such as the debt service ratio, the loan-to-value ratio, or capital adequacy requirements at financial institutions — a gap critics say blunts the efficiency of its policy response.
In South Korea, the Financial Services Commission formulates microprudential policy while the Financial Supervisory Service handles enforcement. By contrast, central banks in major economies such as the United States, the United Kingdom and France directly hold and exercise authority over macroprudential policy tools and microprudential supervision.
Former BOK Governor Lee Chang-yong repeatedly stressed the need for the central bank to acquire macroprudential policy tools. At a conference co-hosted last July with the Asian Development Bank and the Journal of International Money and Finance, he said that "unlike major countries, Korea does not hold direct macroprudential policy tools or microprudential supervisory authority, which raises the concern that when disagreements arise with the government over the intensity or direction of policy during the coordination process, the speed and effectiveness of the policy response could suffer." He added that "over the medium to long term, it is necessary to supplement the legal and institutional framework in a direction that strengthens the central bank's macroprudential role."
At a monetary policy press briefing the same month, he said the rise in household debt and the problems in real estate project financing had occurred "because the authorities mentioned macroprudential policy but did not enforce it strongly," and again called for an expanded role for the BOK.
Macroprudential regulatory tools are directly tied to institutional power — and that makes them a sensitive prize. Any push by the BOK to acquire them risks escalating into a turf war with financial regulators. That dynamic is widely seen as one reason the central bank confined itself to a general response.
Governor Shin is understood to share the view that the BOK needs its own macroprudential regulatory tools, though he has not yet said so publicly. At his confirmation hearing in April, he acknowledged the limits of the BOK's current position, saying that "the debt service ratio is directly tied to microprudential supervisory authority over individual financial institutions — authority the BOK does not have, so direct management would be difficult." At last month's monetary policy press briefing, he said "using monetary policy to rein in housing prices is a stretch," and called for coordination with macroprudential policy.
kimstar@heraldcorp.com
