Software glitches have paralyzed the central bank's online settlement network Friday, according to the Bank of Korea (BOK) Saturday.

The announcement came a day after the central bank experienced difficulties in transactions with other financial companies on Friday. ``The disruption was caused by a software problem in our internal trading program,'' a BOK Official said.

From 3:30 p.m. Friday for nearly five hours, its computer network called ``BOK Wire,'' was crippled for the first time because of the problem. The network was back to normal around 8 p.m.

Analysts said that although there were no reports of major disruptions, it had dealt a severe blow to the central bank's reputation.

Daily trading through the BOK-wire amounts to nearly 90 trillion won. It is estimated that dozens of trillion won in transactions were halted due to the network problem.

When the BOK's online inter-bank settlement network is in trouble, a financial firm is unable to repay debts to other companies on time, and those suffering from liquidity shortage may be under the technical default temporarily.

``The inter-bank transactions were virtually paralyzed on Friday due to the faulty network,'' a Seoul banker said. ``We had to do transactions manually for several hours via telephones or facsimiles.''

Another commercial bank official said that the accident seemed to have happened because of the old settlement system. The central bank has used the current system since 1999 and plans to replace it with a new one.

BOK-wire refers to the central bank's real-time gross settlement system, which links the BOK to other financial firms. The system handles large transactions between financial firms both in real time and electronically.

According to the central bank, the daily settlements of transactions between financial companies through BOK-wire numbered recently average around 4,500, valued at around 90 to 120 trillion won.

The daily amount of the BOK wire-based settlements averaged 88.04 trillion won in 2003, up from 80.28 trillion won in 2002, 75.54 trillion won in 2001, 67.03 trillion won in 1999 and 32.19 trillion won in 1997.

Analysts stressed that BOK should upgrade their network system, as there is always the possibility of another incident occurring.

On Saturday, Bank of Korea Governor Park Seung ordered his staff to study essential measures to prevent the recurrence of similar accidents.

Korea Times

-- Anonymous, April 06, 2004