The Pros and Cons of Issuing Larger Bills

Should 100,000 won or 50,000 won notes be issued? If either or both are issued, when would be the right time to do so? Arguments for and against issuing larger bills are intensifying.

Economic circles are in favor of issuing the larger bills, but civic groups fear that larger bills may be used for bribery. The government has been negative towards the early issuing of larger bills, even though it agrees that they are necessary.

The controversy erupted when Park Seung, Governor of the Bank of Korea (BOK), announced on Sunday that he would consult with the government on the issuance of larger bills and the redesign of existing banknotes to prevent counterfeit after the general election in April.

The highest-denomination bills of other countries, such as the United States’ 100-dollar bill, the European Union’s 500-euro bill, Japan’s 10,000-yen bill, Britain’s 50-pound note and China’s 100-yuan bill, are all higher than Korea’s 10,000-won bill.

Kim Jin-pyo, the Deputy Prime Minister and Minister of Finance and Economy, said on Tuesday that he was in support of renovating the current currency system. But then he stepped back by saying that “this is not the right time given the political and social circumstances.”

On the other hand, economic experts are in favor of issuing larger bills.

“Annually, we spend 280 billion won of issuing checks and 500 billion won of distribution costs,” said Lee Hyeon-seok, a managing director of the Korea Chamber of Commerce and Industry. “Given the size and scale of the Korean economy and its activities, we need larger bills.”

“Convenience should come first when we consider issuing high denomination bills, and I think that the issuance will improve it,” said Kim Byeong-yeon, a senior researcher of the Korea Institute of Finance. “Issuing the 100,000-won note will be good since people are accustomed to using the 100,000-won check. But we should also consider the economic scale and public demand.”

Nevertheless, civic groups are against the issuance of large-denomination bills.

“Issuing the 100,000-won bill will make the problem of illegal political funds worse,” said Wi Pyeong-ryang, a director of the Citizens Coalition for Economic Justice. “Larger bills can be easily used in slush funds and illegal deals, and it will be harder to investigate bribery cases through follow-up checks.”

Joong-Hyun Park Suk-Ho Shin sanjuck@donga.com kyle@donga.com