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BOK net profit

BOK posts record 2020 net income on higher foreign asset gains

By Mar 12, 2021 (Gmt+09:00)

BOK posts record 2020 net income on higher foreign asset gains

The Bank of Korea paid the second-highest amount of tax revenue in the country last year, trailing only Samsung Electronics Co., after the South Korean central bank posted record net income boosted by higher foreign exchange reserve gains.

The BOK said on Mar. 11 that it has reflected 2.8 trillion won ($2.48 billion) in corporate tax in its 2020 financial statements. That marks the largest amount since the establishment of the central bank in 1950, and the highest value following tech giant Samsung, which paid 9.94 trillion won in corporate tax.

SK Hynix Inc., the second-best performer in terms of profit among listed Korean firms, paid a corporate tax of 1.43 trillion won last year.

The central bank’s record-high tax revenue comes from its all-time high net profit of 7.37 trillion won, up 38.6% from 5.31 trillion won in 2019.

The BOK’s profits mostly derive from operating its foreign currency-denominated assets, including the foreign exchange reserves it holds to maintain stability in the country’s financial markets.

Reserves are held in one or more reserve currencies, including the US dollar, the euro, the Japanese yen, the British pound and the Chinese yuan. With the foreign currency reserves, raised by issuing Monetary Stabilization Bonds (MSBs), the BOK usually buys into US Treasuries and other sovereign bonds to make a profit. The central bank held $443 billion in foreign exchange reserves at the end of 2020.

BOK posts record 2020 net income on higher foreign asset gains

The bank also makes gains by committing part of the reserves to the Korea Investment Corp. (KIC), the country’s sovereign wealth fund, for investment in overseas assets.

Financial industry officials said the BOK’s hefty net profit was boosted by the rise of bond prices, which pushed yields lower. The BOK booked gains by selling such bonds it purchased earlier at lower prices. Low interest rates also helped it issue MSBs at favorable terms, they said.

Besides the 2.8 trillion won in corporate tax, some 5.15 trillion won of its net profit went to the state coffers according to the Bank of Korea Act.

Under the law, the central bank can retain only 30% of its gains, paying the rest to the government.

Write to Ik-Hwan Kim at lovepen@hankyung.com

In-Soo Nam edited this article.

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