Photo: Lee Bok-hyeon. Credit: Financial Supervisory Service.
When it was made public on August 2, the minutes for the July meeting of the Bank of Korea 한국은행, South Korea’s central bank, showed a much more contentious meeting than had initially been reported. The BOK’s Monetary Policy Board 금융통화위원회 explicitly criticized the government numerous times, noting that the BOK’s policy of raising interest rates is not having the desired effect because the Yoon Suk-yeol 윤석열 administration has persisted in relaxing real estate transaction regulations and directing banks to keep interest rates low.
The Yoon administration has been pulling out all the stops to keep up the value of Seoul’s real estate, which was the leading reason for the conservative president’s razor-thin victory in the March 2022 presidential election. As rising interest rates began inflicting pain upon Seoul real estate investors with variable rate mortgages, Lee Bok-hyeon 이복현, head of the Financial Supervisory Service 금융감독원, South Korea’s top financial regulator and analogue of the United States’ Securities and Exchange Commission, stepped in and directly ordered banks to lower their interest rates. (See previous coverage, “Yoon Administration’s Visible Hand.”) This ran counter to the BOK’s policy, which sought to reduce the scale of household debt by raising interest rates.
Lee responded with condescension to a question about the BOK’s criticisms: “I give due respect to their policy choice. They have their reasons, and they are being rational in their own way.” Lee’s remark is a stark break from the norm for South Korean finance bureaucrats, who would typically avoid commenting on BOK policy out of deference to the central bank’s independence. Lee is not a typical finance bureaucrat, however: he is known as one of Yoon’s closest associates, and was the first former prosecutor to be appointed to head FSS without any experience in financial regulation. An unnamed BOK official, quoted by the Hankyoreh 한겨레, called Lee’s remarks “insolent.”