🚨 The Role and Importance of South Korea's F4 (Finance4) in the Economy
Economic Feed | 2025.01.04
The F4 (Finance4) meetings have received significant attention during the recent December 3 state of emergency and impeachment crisis. The macroeconomic and financial issues consultative meeting, also known as the F4 meeting, is a high-level economic, monetary, and financial authority conference attended by four key figures responsible for South Korea's economic system: the Minister of Economy and Finance, the Governor of the Bank of Korea, the Chairman of the Financial Services Commission, and the Governor of the Financial Supervisory Service. During the recent state of emergency, F4's quick response has been credited with containing financial market turmoil.
The Ministry of Economy and Finance, Bank of Korea, Financial Services Commission, and Financial Supervisory Service each play pivotal roles in maintaining financial system stability and responding to various crises through fiscal policy, monetary policy, financial regulation, and supervision. These institutions, while performing different roles, work closely together to ensure the stability and growth of South Korea's economy. Today, we will examine in detail what each of these four institutions does and how they relate to each other.
💡 Summary of South Korea's F4 (Finance4)
- The F4 (Finance4, macroeconomic and financial issues consultative meeting), consisting of the Ministry of Economy and Finance, Bank of Korea, Financial Services Commission, and Financial Supervisory Service, plays a key role in maintaining South Korea's economic stability.
- These institutions promptly respond to crisis situations through fiscal policy, monetary policy, financial regulation, and financial supervision, helping to contain financial market turmoil.
- F4 members collaborate closely while sometimes experiencing conflicts due to differences in policy objectives, but they share the common goal of economic stability and growth.
1️⃣ What is F4 (Finance4)?
F4 (Finance4) is a high-level economic, monetary, and financial authority consultative body in which the heads of four institutions—the Ministry of Economy and Finance, Bank of Korea, Financial Services Commission, and Financial Supervisory Service—participate as the central axis of the South Korean economy. This conference, also called the macroeconomic and financial issues consultative meeting, plays a crucial role in maintaining the stability of the Korean economy through rapid response and policy coordination during economic crises.
As of January 2025, F4 has received positive evaluation for minimizing financial market confusion with its quick response during the December 3 state of emergency and subsequent impeachment crisis. F4 functions beyond a mere consultative body, serving as a safety net for the national economy.
2️⃣ Ministry of Economy and Finance
💰 Ministry of Economy and Finance - The Control Tower of Economic Policy
The Ministry of Economy and Finance is the core department that oversees the nation's fiscal policy, responsible for budget planning and economic policy formulation. It establishes medium to long-term development strategies across the economy, setting the direction of the national economy through tax policies, national fiscal management, and coordination of international economic relations.
Within the F4, the Minister of Economy and Finance represents the government's economic policy stance and leads policy coordination with other financial institutions. Particularly during economic crises, the minister occupies an important position in determining fiscal policies for economic stimulus or stabilization measures.
🤴 Status and Role of the Minister of Economy and Finance
The Minister of Economy and Finance is the highest authority for South Korea's economic policy and holds a special status among cabinet members. As a key figure implementing the President's economic policy vision, the minister typically serves concurrently as Deputy Prime Minister, indicating the highest rank among ministers in the economic sector.
The main roles of the Minister of Economy and Finance include:
Overall Economic Policy Coordination: The minister comprehensively coordinates economic policies across government departments and draws the big picture of national economic management. In particular, they chair the Economic Ministers' Meeting to coordinate economic policies across multiple ministries.
National Finance Manager: They oversee all aspects of national fiscal management, including budget planning and execution, tax system reform, and government bond issuance. They play the important role of submitting and explaining the budget proposal to the National Assembly each year.
Economic Crisis Manager: In economic shock situations such as the foreign exchange crisis, global financial crisis, and COVID-19, they stand at the forefront of crisis management to devise countermeasures. They essentially serve as the chair at F4 meetings, leading crisis response.
International Economic Representative: They represent South Korea in major international economic organizations such as the International Monetary Fund (IMF), World Bank, and G20. They advocate for Korea's position on global economic issues and foster international cooperation.
Within the F4, the Minister of Economy and Finance represents the government, presenting the direction of economic policy and leading policy coordination with other institutions. Especially during periods of significant political change, their responsibility to establish and implement continuous economic policies that maintain economic stability becomes even more important.
Some former Ministers of Economy and Finance have later been appointed as Prime Ministers or Governors of the Bank of Korea, demonstrating the importance of the expertise and economic leadership this position carries. Even in recent economic issues, the minister's statements and policy directions have immediate effects on the market, showing their substantial influence.
3️⃣ Bank of Korea
🏦 Bank of Korea - Guardian of Monetary Policy
The Bank of Korea, as South Korea's central bank, is responsible for monetary policy and price stability. It promotes macroeconomic stability through controlling market funds flow by adjusting the base interest rate, managing foreign exchange reserves, and operating the payment and settlement system.
The Governor of the Bank of Korea has independent monetary policy decision-making authority and, within the F4, speaks for economic stability from a neutral position distinct from the government. The governor works closely with other institutions to balance the two core objectives of price stability and financial system stability.
👨🏫 Status and Role of the Governor of the Bank of Korea
The Governor of the Bank of Korea is the head of South Korea's central bank and the highest authority on monetary policy and financial stability. The most distinctive feature is that, unlike other F4 members, the governor leads an independent central bank rather than a government organization.
The main roles of the Governor of the Bank of Korea include:
Monetary Policy Decision-maker: As chair of the Bank of Korea's Monetary Policy Committee, the governor leads base rate decisions. This directly affects market interest rates and is a key tool for controlling economic overheating or recession. The governor's statements can move financial markets, demonstrating their significant influence.
Price Stability Guardian: The governor fulfills the price stability mandate specified in the Bank of Korea Act. They promote medium to long-term price stability through inflation targeting and design and implement monetary policy to achieve this.
Financial Stability Monitor: They monitor systemic risks for financial system stability and take measures such as providing liquidity when necessary. Through financial stability reports, they assess the soundness of the financial system and warn of risk factors.
Foreign Exchange Reserves Manager: They manage the nation's foreign exchange reserves and intervene in the foreign exchange market when necessary to promote exchange rate stability. They serve as the vanguard in responding to international financial market volatility.
The Governor of the Bank of Korea is appointed by the President for a four-year term and can be reappointed since it is not a single-term system. This is an institutional mechanism to ensure the continuity and independence of monetary policy. Maintaining independence from political influence is particularly important, and legally, the governor is guaranteed not to receive instructions or interference from the government.
Within the F4, the Governor of the Bank of Korea forms the two pillars of macroeconomic policy alongside the Minister of Economy and Finance. Economic stability and growth are possible when fiscal policy (Ministry of Economy and Finance) and monetary policy (Bank of Korea) are appropriately harmonized, making policy coordination between the two institution heads extremely important. Especially during economic crises, the governor's market stabilization messages and prompt decisions on liquidity supply play a crucial role in preventing crisis spread.
The Governor of the Bank of Korea also plays an important role on the international stage. They represent Korea at the Bank for International Settlements (BIS) Board of Directors, IMF and World Bank annual meetings, etc., advocating for Korea's position and contributing to global financial cooperation. They also play an important role in building international financial safety nets, such as establishing currency swap agreements between central banks.
4️⃣ Financial Services Commission
🏛️ Financial Services Commission - The Central Axis of Financial Policy and Regulation
The Financial Services Commission is the institution responsible for policies and regulations across the financial industry. It promotes financial industry development and stability through licensing financial institutions, establishing financial market regulatory systems, and advancing financial innovation.
Within the F4, the Chairman of the Financial Services Commission plays an important role in discussing major financial market-related policy decisions and response measures during crisis situations. When sharp fluctuations in the financial market or systemic risks are detected, the chairman works to promote market stability through appropriate regulatory and policy responses.
👨⚖️ Status and Role of the Chairman of the Financial Services Commission
The Chairman of the Financial Services Commission is the highest authority for South Korea's financial policy and financial industry regulation, a high-ranking government official with ministerial status. The chairman has a very significant influence on the financial industry and plays a key role in maintaining financial market order and discipline.
The main roles of the Chairman of the Financial Services Commission include:
Financial Policy Designer: They establish medium to long-term policy directions for national financial industry development and design policies for financial market advancement and competitiveness enhancement. They also play a leading role in devising policies to promote financial innovation, such as fintech and digital finance.
Financial Regulation Chief: They determine the regulatory framework for financial institutions and financial markets. They have final decision-making authority regarding licensing, prudential regulation, and business conduct regulation across all financial sectors including banking, insurance, securities, and asset management.
Financial Market Stability Guardian: They identify systemic risk factors in advance and prepare response measures. Especially during financial crises, they play an important role in deciding emergency liquidity support, financial institution restructuring, and market stabilization measures.
Financial Consumer Protection Officer: They design systems related to protecting financial consumer rights and regulate unfair practices by financial companies. They also promote policies to expand financial inclusion and strengthen financial access for vulnerable groups.
The Chairman of the Financial Services Commission presides over the Financial Services Commission meetings and deliberates and decides on major financial policies together with the nine members of the Commission. They also have the authority to direct and supervise the Financial Supervisory Service, setting the major direction of financial supervision.
Within the F4, the Chairman of the Financial Services Commission is a key figure responsible for micro financial policies and regulations, promoting financial market stability and development through harmonious cooperation with the Ministry of Economy and Finance (macroeconomic policy) and the Bank of Korea (monetary policy). Particularly during financial crises, they play an important role in determining financial market stabilization measures and financial institution support plans.
The chairman also represents South Korea in international financial organizations and consultative bodies, participating in international financial regulatory discussions. Through activities in the Financial Stability Board (FSB), International Organization of Securities Commissions (IOSCO), etc., they respond to global financial regulatory trends and contribute to enhancing the international status of the Korean financial market.
5️⃣ Financial Supervisory Service
🏪 Financial Supervisory Service - Financial Market Monitor
The Financial Supervisory Service is the institution that performs practical supervision of the financial market and financial institutions. It maintains the soundness of the financial system and protects the rights of investors and consumers through financial institution inspection, consumer protection, and financial incident prevention.
Within the F4, the Governor of the Financial Supervisory Service plays the role of directly identifying and sharing financial issues and risk factors occurring in the field. They provide important information for early detection and response to financial institution soundness issues or factors threatening market stability.
👮♂️ Status and Role of the Governor of the Financial Supervisory Service
The Governor of the Financial Supervisory Service is the head overseeing South Korea's practical financial supervision, a key figure leading field-centered financial supervision and inspection. While in a special position subject to the direction and supervision of the Financial Services Commission, they have considerable authority and autonomy in practical financial supervision.
The main roles of the Governor of the Financial Supervisory Service include:
Financial Institution Supervisor: They oversee direct inspection and supervision of all financial institutions, including banks, securities firms, insurance companies, and card companies. They check the soundness and risk management status of financial institutions, identify problems early, and guide improvements.
Financial Consumer Protection Practitioner: They monitor and sanction unfair business practices, financial fraud, and mis-selling by financial companies. They oversee financial consumer damage relief and dispute mediation, and protect consumer rights through financial education and information provision.
Financial Market Monitoring Officer: They monitor financial market instability factors in real-time and prepare prompt response measures when abnormal signs are detected. It is particularly important to identify problems that could become systemic risks early.
Financial Incident Prevention and Response Chief: They prevent financial incidents and financial crimes, and lead prompt investigation and response when they occur. They play a role in enhancing financial market transparency and reliability through investigating unfair trading in the capital market and checking internal controls of financial companies.
The Governor of the Financial Supervisory Service maintains a close cooperative relationship with the Financial Services Commission while being in a balanced position that requires exercising independence and expertise in field supervision. While the Financial Services Commission determines policy and regulatory direction, the Financial Supervisory Service implements and supervises these in the field.
Within the F4, the Governor of the Financial Supervisory Service identifies the actual state of the financial industry and market from the position closest to the field, and based on this, presents substantive risk factors and response measures. Particularly during financial crises, they lead frontline responses such as checking financial institution soundness, identifying vulnerable sectors, and implementing specific support measures.
The Governor of the Financial Supervisory Service also monitors global financial supervision trends through cooperation with international financial supervisory organizations and promotes the advancement of Korea's financial supervision system. They contribute to applying international supervisory standards domestically and enhancing the global consistency of financial supervision through exchanges with the Basel Committee on Banking Supervision (BCBS), International Association of Insurance Supervisors (IAIS), etc.
6️⃣ F4's Cooperation Mechanism and Crisis Response System
F4 discusses economic and financial issues and coordinates each institution's policies through regular meetings. Especially during economic crises, they convene emergency meetings to activate a prompt joint response system. In this process, the expertise and authority of each institution organically combine to enable effective crisis management.
Policy Coordination and Decision-making Process
F4's greatest strength is that all key decision-makers in macroeconomics and finance can gather in one place to devise comprehensive response measures. It is the only consultative body that can comprehensively utilize the four core economic policy tools: fiscal policy (Ministry of Economy and Finance), monetary policy (Bank of Korea), financial regulation (Financial Services Commission), and financial supervision (Financial Supervisory Service).
By gathering the heads of each institution to discuss current issues, they can minimize conflicts between policies and maximize synergy. For example, when the Ministry of Economy and Finance's fiscal expansion policy and the Bank of Korea's interest rate cut policy are harmoniously implemented during an economic recession, they can produce greater effects.
Recent Crisis Response Case: December 3 State of Emergency
The state of emergency that occurred on December 3, 2024, and the subsequent impeachment crisis brought great uncertainty to the Korean financial market.
In this situation, F4 promptly convened an emergency meeting and implemented the following response measures:
- Expansion of liquidity supply for financial market stability
- Implementation of stock market stabilization measures to reduce market volatility
- Strengthened foreign exchange market monitoring and preparation for intervention if necessary
- Financial institution soundness checks and support plan development for vulnerable sectors
These preemptive and comprehensive responses have been credited with preventing sharp fluctuations in the financial market despite political uncertainty.
7️⃣ Challenges Facing F4 and Future Tasks
International Financial Environment Changes and Responses
In a rapidly changing global financial environment with rising global interest rates and increasing geopolitical risks, F4's role is becoming increasingly important. To respond to complex challenges such as economic conflicts between the U.S. and China, global supply chain reorganization, and accelerating digital transformation, F4 needs to build more strategic and preemptive cooperation systems.
Digital Financial Innovation and Regulatory Balance
The emergence of new financial paradigms such as digital assets, fintech, and AI finance presents F4 with the difficult challenge of balancing innovation promotion and risk management. Building a regulatory framework for new financial products such as virtual assets and strengthening digital financial infrastructure are important tasks that F4 must solve together.
Economic Polarization and Inclusive Financial Policy
The polarization problem, where economic growth benefits are not evenly distributed throughout society, is another important issue F4 should pay attention to. Through expanding financial inclusion, supporting vulnerable groups, and building sustainable growth models, F4 needs to strengthen cooperation systems for inclusive growth beyond simple economic stability.
8️⃣ Conclusion: F4 as South Korea's Economic Safety Net
F4 (Finance4) has established itself as a key cooperation mechanism for the stability and growth of the Korean economy, beyond a simple consultative body. By bringing together the heads of four institutions with different roles and expertise to comprehensively discuss and respond to economic and financial issues, it plays a pivotal role in maintaining the stability of the Korean economy amid the rapidly changing global economic environment.
The prompt and effective response demonstrated by F4 during recent political uncertainty has once again confirmed the importance of such a cooperation system in crisis situations. Going forward, F4 is expected to wisely navigate the various challenges facing the Korean economy through even closer cooperation and strategic policy coordination.
References
- Ministry of Economy and Finance website: www.moef.go.kr
- Bank of Korea website: www.bok.or.kr
- Financial Services Commission website: www.fsc.go.kr
- Financial Supervisory Service website: www.fss.or.kr