In the early part of the year 2009, Korea will have banknotes with denominations higher than 10-thousand won, which has been the highest denomination bill in Korea since its introduction 34 years ago in 1973.

As the Korean economy has grown a great deal since then, people have been demanding bills of higher denominations. Subsequently, the Bank of Korea decided to issue 50-thousand and 100-thousand banknotes, which are certain to bring changes to the local economy.

Let’s meet with Assistant Manager Park Woon-seop of the Currency Issue Department at the Bank of Korea to hear about the plan to issue these banknotes.


"The highest denomination bill currently in circulation is the 10-thousand won bill, which was first issued in 1973. Since then, Korea has undergone phenomenal economic growth, and the financial situation now has changed quite a bit from the one in the past. This is what prompted the Bank of Korea to issue the new high-denomination bills two years down the road.

We figured that the 50-thousand and 100-thousand banknotes would be appropriate for today’s Korean economy. Now we have to work on the size and color of the banknotes, anti-counterfeiting features, Braille marks for visually impaired people, and other design issues."


Given the size of the Korean economy, the issuance of high denomination banknotes seems a little late in the coming.

Korea’s gross domestic product has expanded to more than 150 times what it was in 1973, and national income by 100 times. Consumer inflation has registered a twelve-fold increase since then, but no change has come to Korea’s currency. It has become clear that the Korean economy has outgrown its currency denominations.

As a matter of fact, the average amount for the highest denomination notes among all OECD member nations stands at 370-thousand won. But Korea’s 10-thousand won bill registers at only 2.7% of that average, a figure that doesn’t quite fit with the world’s 10thlargesteconomy.

Another issue is “redenomination.” Here’s Assistant Manager Park Woon-seop to explain the decision not to re-denominate Korea’s currency.


"Inflation in Korea has caused the nation’s currency denomination to be higher than those of other nations. For instance, one dollar equals 900 won in Korea. Not many countries’ denominations have as much value against the dollar as the won does, and Koreans have to bear some inconveniences stemming from that.

The Bank of Korea thought about “redenomination,” and perhaps dropping three zeros from the current denomination. A redenomination would make 10 won have the same value as the 10-thousand won bill does today.

But we were not able to achieve public consensus on redenomination and even when we do, the National Assembly has to legislate it first. So the issue of redenomination will have to be discussed at a later date."


Redenomination would reduce the denominations of banknotes to one-one thousandth of their current number, while leaving their values as they are. Considering that a 100-thousand won bill would need to have five zeros, the currency issuing authorities thought about re-denominating concurrently with the new banknote issuance.

However, when the denominations are slashed to one-one thousandth of the current ones, anything under the decimal point will be rounded up, which would result in inflation. Since redenomination would inevitably bring about great confusion, tantamount to a complete currency reform, the authorities have to be very careful about changing the denominations.

Then how will the appearance of these new high-denomination bills affect the Korean economy?


"Up until now, Koreans have used 100-thousand won cashier’s checks in place of high-denomination notes. The lifespan of a 100-thousand won cashier’s check is only about 10 days, which means that the check becomes unusable too soon.

Banks are estimated to spend about 280-billion won a year in issuing, dispensing, and processing these checks, which could be saved when the new high-denomination notes come into circulation. In addition, banks can save about 40-billion won a year on managing, transporting and minting 10-thousand won bills."


Besides just the macro-economic effects, the issuance of 50-thousand and 100-thousand won banknotes will make transactions much easier for people – they won’t have to count, carry around, and store so many 10-thousand won notes.

In addition, people won’t need to pay an extra charge for cashing a cashier’s check, or endorse the checks with their phone numbers and signatures. Convenience is the reason that authorities have been attempting to introduce large denomination bills since the 1980s.

Then why haven’t large banknotes made it into the lives of Koreans sooner? It’s because of possible abuse. Since cash is harder to track than checks, 100-thousand won bills are much easier to use than big cashier’s checks for bribery, money laundering, tax evasion and other illegal financial activities. Also, large bills could trigger inflation, as it will become easier for consumers to spend large amount of cash.

There may be a number of benefits that come with large denomination banknotes, but concerns also exist about their downsides.


"There are two main concerns – one is that large bills could facilitate bribery and other illegal financial transactions, and the other is inflation.

But lately, an institutional mechanism has been put into place which mandates that any transaction involving a large amount of cash must be reported, to discourage bribery. The government is also ready to take additional measures if needed.

Now that we have announced the plan to issue new bills, we have to start working on the details. The new bills are expected to debut in early 2009."


The Bank of Korea will prepare for all contingencies in order to minimize the side effects of issuing the large new bills.

It will take two years for the bank to prepare for the bills’ introduction – from selecting portraits to go on the bill and inserting anti-forgery features, to finally minting the finished bills.

Then Koreans will be able to see the new higher-denomination bills that will change the face of Korea’s financial transactions.