The BOK’s Role in Treasury Service
The Bank of Korea(hereinafter, 'BOK') handles treasury business as ‘banker to the government’. This is one of the main functions which the central bank carries out.
The BOK, as the depository of the treasury funds of the Republic of Korea government, handles receipts and disbursements of Treasury funds for the central government and its agencies in accordance with the following legislation.
The Bank of Korea, as the depositary of the Government of the Republic of Korea, shall handle national revenue deposits in accordance with the provisions of the Treasury Funds Management Act." (Article 71 of the Bank of Korea Act)
"The Bank of Korea should handle the business of the receipt and disbursement of treasury funds." (Article 36 of the Treasury Funds Management Act)
Treasury Services of the BOK
Receipt of treasury funds
The BOK is the organization which receives and disburses treasury funds. However, due to a limited number of its branches, the BOK therefore designates branches of financial institutions nationwide as Treasury Agencies and commits the receipt business to them.
The head office and branches of the BOK collect treasury funds received by Treasury Agencies within their jurisdiction, and carry out instructions and management for them. According to the Treasury Funds Management Act, the Postal Service Organization (post offices) also deal with treasury funds.
Disbursement of treasury funds
The Government's Disbursement Offices issued treasury checks for payment until 2003. However, after the launch of Treasury Funds Real Time Transfer System in 2003, Disbursement Offices pay treasury funds to creditors directly via the system.(See below 'Treasury business computerization/ Electronic payment system of treasury funds' for detail.)
Receipt and disbursement of treasury funds are accounted for using two separate methods, Treasury Funds Accounting and Treasury Business Accounting.
- Treasury Funds Accounting
As treasury funds handled by the BOK’s branches and Treasury Agencies are aggregated into the BOK’s head office, this is immediately reflected in the government account.
All kinds of treasury funds (Revenues, Expenditures, Other Treasury Funds) are aggregated and accounted for as deposits of the state, in accordance with the Treasury Funds Management Act.
- Treasury Business Accounting
Since Treasury Funds Accounting by itself does not show what kind of government funds have been handled, additional detailed accounting by sub-accounts is needed to clarify the details of increases or decreases of the government account.
This detailed Treasury Business Accounting starts with the sorting and listing of treasury funds transactions into sub-accounts, by receipt evidence and disbursement evidence. It ends with the consolidation of the daily Treasury Funds Balance Sheet.
Treasury business electronization
- Electronic receipt of treasury funds
Only a few Revenue Collecting Offices had introduced a system for paying revenues using electronic means by 2000, mostly for the taxpayers' convenience.
For taxpayers paying their taxes by visiting the electronic payment web-sites of such Revenue Collecting Offices, or through other electronic means, their banks first withdraw the relevant amounts of money from their accounts. These banks file-transfer the data to the BOK on the following day. The BOK then settles the treasury funds in accordance with this data on the subsequent business day.
- Electronic payment system for treasury funds
In 2003, the Ministry of Strategy and Finance (MOSF) and the BOK introduced a system for paying treasury funds by electronic means, for the creditors' convenience.
Disbursement Offices individually establish disbursement accounts at the BOK in advance, and pay treasury funds to creditors through the Treasury Funds Real Time Transfer System, introduced in 2003 and operated by means of real-time electronic transfer through the network (Treasury Network) connecting the MOSF(including the Disbursement offices), the BOK, and financial institutions.
Disbursement Offices summarize the individual disbursement data and send this to the BOK, and the BOK then sends this to financial institutions through the Treasury Network. As soon as receiving the notification of payment from a financial institution to a creditor's account, the BOK notifies the result to the relevant Disbursement Office.