Choi Sang-mok’s departure as the ex-Deputy Prime Minister and Minister of Economy and Finance is anticipated to lead to alterations within the operations of the Finance 4 (F4). This non-official advisory panel centers on macroeconomic and financial matters. Comprised of key figures such as the deputy prime minister responsible for economic policies, the Bank of Korea’s governor, the chairperson of the Financial Services Commission, and the head of the Financial Supervisory Service, the F4 is recognized for its efficient decision-making process. Their power originates from having leading financial overseers directly engaged in their discussions.
On May 9, according to official statements, the Financial Four (F4) has actively worked towards stabilizing markets amid volatile conditions. Initially established in 2022 following Gangwon-do’s withdrawal of its assurance for a 205-billion-won ($146 million) asset-backed commercial paper (ABCP), which was issued by the Gangwon Jungdo Development Corporation and subsequently paralyzed the bond market, the F4 spearheaded initiatives. They announced a liquidity assistance program valued at “over 50 trillion won” along with an additional unspecified amount (“alpha”). This effort culminated in securing commitments totaling 95 trillion won ($68 billion) from South Korea’s top five banks, resulting in combined interventions reaching up to 148 trillion won ($105 billion).
That same year, after Heungkuk Life Insurance decided against redeeming a $500 million hybrid bond issue amid increasing interest rates—a move that caused a significant downturn in confidence among investors regarding South Korean debt instruments globally—the F4 intervened yet again to restore stability. This incident prompted the formal establishment of the F4 as an ongoing forum, convening every week at the Bankers’ Club located in downtown Seoul.
On December 3 of last year, following the declaration of martial law, the F4 gathered within one hour and stated they would “deploy all necessary monetary and foreign exchange stability measures, including unrestricted liquidity assistance, to tackle market volatility.”
Nevertheless, following a shift in leadership and with the position of Deputy Prime Minister for Economic Affairs presently unoccupied, the group’s prominence has waned lately. Despite this, the F4 convened a session early on May 8th soon after the U.S. Federal Open Market Committee (FOMC) revealed its most recent interest rate determination. This gathering was led by Acting Minister of Economy and Finance First Vice Minister Kim Beom-seok.
After the meeting, the ministry issued a statement indicating that the F4 attendees concurred with maintaining round-the-clock surveillance of financial and foreign exchange markets due to several significant forthcoming events in global finance, particularly the initial formal trade discussions between the United States and China.
Nevertheless, uncertainties remain both internally and externally regarding the F4’s upcoming responsibilities. An official from the Ministry of Economy and Finance expressed this doubt, stating, “It is yet to be determined whether the F4 will keep conveying market communications.” This statement implies potential changes in its course.
On May 5th (local time), during his attendance at the Asian Development Bank’s annual gathering in a Milan, Italy hotel, Bank of Korea Governor Rhee Chang-yong stated to journalists that “the continuation of the F4 meetings will depend on the decision of the new finance minister,” suggesting that this forum might cease operations altogether.
At the same time, certain scholarly opinions have expressed reservations regarding the legitimacy of the F4 gatherings. Professor Woo Seok-jin from Myongji University, who specializes in economics, commented, “The lack of formal documentation for these F4 sessions is extremely problematic. Given that the Bank of Korea should operate independently, such proceedings make it seem like this entity is merely following the government’s lead.”
Other viewpoints have been put forward as well. According to Kim Jung-sik, who is an emeritus professor at Yonsei University, “The F4 system ought to be maintained in some capacity. Every entity plays a specific part—the fiscal policies handled by the Ministry of Economy and Finance, monetary policies managed by the Bank of Korea, and the responsibility for maintaining financial market stability shared between the Financial Services Commission and the Financial Supervisory Service. It’s crucial that these entities work together effectively.”
Leave a Reply