(Seoul = Yonhap News) Reporter Ji-hoon Han = It was revealed that in the first half of this year, employees of the Bank of Korea's Financial Stability Bureau (hereinafter referred to as the Financial Stability Bureau) rapidly expanded their stock trading volume.
Controversy is expected over whether those who should be sounding the alarm about the possibility of increased volatility in the financial market are incompetent or have fallen into moral hazard by instead investing in stocks at a critical time.
According to data submitted by the Bank of Korea to Kim Tae-nyeon, a member of the Democratic Party of Korea, on the 13th, the total stock trading volume (based on net trading amount) of financial security employees in the first half of this year was 274.2 million won.
Compared to the first half of last year (5.2 million won), the transaction amount increased by a whopping 53 times in just one year. Although the amount itself was not very large, the rate of increase was unusually high.
This is the result of stock trading status being reported only to employees who are authorized to access information from the Financial Supervisory Service in accordance with the Bank of Korea's internal regulations.
In the case of the Financial Intelligence Bureau, it is known that some of the 64 employees report transaction details such as equity securities, single-stock exchange traded funds (ETFs), and bonds.
The stock trading volume of the employees of the financial institution was barely 100,000 won in the first half of 2024, but jumped to 23.5 million won in the second half of that year. It then fluctuated to 5.2 million won in the first half of last year and 69.1 million won in the second half, before increasing significantly this year.
The number of transactions, including buying and selling stocks, more than tripled from 68 in the first half of last year to 224 in the first half of this year.
It is analyzed that the reason that the transaction amount increased by a much larger amount than the number of transactions was because the amount per transaction increased. It can be interpreted that the employees made a 'bold' bet.
There has also been a noticeable increase in stock trading by Financial Market Bureau employees, who are known to have an intimate look into domestic and international financial markets.
In the first half of this year, the total stock trading volume of Financial Market Bureau employees, including the Director of the Financial Markets Department, the Open Market Department Manager, and the Market Operations Team, was 219.5 million won, which was 24 times higher than the first half of last year (9.1 million won).
The number of stock transactions also more than tripled from 19 to 59.
The active stock trading of employees of the two departments, which are closely related to the understanding of financial market trends, including the stock market, also contrasts with that of employees in other departments within the Bank of Korea.
For example, employees of the Monetary Policy Bureau, which plays a key role in the base interest rate decision process, drastically reduced stock trading from 54.1 million won in the first half of last year to 2.1 million won in the first half of this year.
It is suspected that in the first half of this year, the Bank of Korea took steps to manage risk in advance, keeping in mind that the Monetary Policy Committee was entering a full-fledged interest rate hike cycle.
The general economic theory is that during periods of interest rate hikes, market liquidity decreases and stock prices turn weak.
For employees of the research bureau, which is in charge of economic analysis and forecasts, the total stock trading volume in the first half of this year was only 5.9 million won. There were no transactions during the first half of last year.
The problem is that such stock trading records were confirmed amid continued criticism that the Financial Intelligence Bureau failed to sufficiently warn of the risks of single-stock leveraged ETFs in the first half of this year.
Previously, in the Financial Stability Report released on June 24, the Financial Supervisory Service predicted regarding this ETF, "It will contribute to preventing the outflow of domestic investment funds overseas and expanding the inflow of overseas funds by resolving the regulatory imbalance with overseas listed ETFs."
At the time, it was expected that “high-risk, high-return demand for domestic blue-chip stocks will be absorbed, leading to expansion of the base of the domestic stock market and strengthening of price discovery functions.”
Lee Chan-jin, head of the Financial Supervisory Service, had already expressed on the 22nd of the same month, two days earlier, that he was “in a situation where I am personally reflecting on whether I should have lied down and blocked (the introduction of ETFs).”
In relation to this, Bank of Korea Governor Shin Hyun-song belatedly apologized during the National Assembly audit on the 12th, saying, "I failed to provide sufficient warning regarding single-stock leveraged ETFs. I apologize to the people."
Regarding the contents of the Financial Security Report released by the Financial Security Bureau four months ago, he also admitted, "It was not appropriate considering the situation at the time."
