## Republic of Korea: Financial Sector Assessment Program-Technical Note-Macroprudential Policy Frameworks and Tools

_IMF Staff Country Reports, September 18, 2020_

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## Bibliographic details
- Published: September 18, 2020
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781513557014.002

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### Overview
- Past experience with financial crises places systemic risk oversight at the core of Korea’s approach to the financial system.
- The Korean authorities have amassed over a decade of experience with macroprudential policies.
- Authorities have established rigorous and sophisticated processes for risk monitoring and publish first-rate analysis.
- Authorities have actively developed measures to mitigate risks to the financial system—notably from FX exposures, and from household indebtedness—as circumstances have changed.
- The system has evolved to be highly complex, posing challenges for coordination, communication, and transparency; the macroprudential toolkit needs to be extended.
- These areas (coordination, communication, transparency, and toolkit extension) should be the focus of efforts to strengthen the policy framework.

### Key findings
- Strengths:
  - Over a decade of practical macroprudential policy experience.
  - Rigorous and sophisticated risk monitoring processes.
  - High-quality published analysis.
  - Active development of measures addressing FX exposures and household indebtedness.
- Weaknesses and challenges:
  - Systemic complexity impedes coordination among authorities.
  - Communication and transparency are challenged by institutional complexity.
  - The macroprudential toolkit is incomplete and requires extension to address evolving risks.

### Policy recommendations / Priorities
- Strengthen coordination mechanisms among relevant authorities to address systemic complexity.
- Improve communication strategies and transparency of macroprudential policy decisions and frameworks.
- Extend and adapt the macroprudential toolkit to cover remaining vulnerabilities (including, but not limited to, FX exposures and household indebtedness).
- Continue rigorous risk monitoring and dissemination of high-quality analysis to support policy actions.

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_Source: https://www.imf.org/en/publications/cr/issues/2020/09/18/republic-of-korea-financial-sector-assessment-program-technical-note-macroprudential-policy-49749_