On the 16th, Bank of Korea Governor Lee Chang-yong stated that the role of the Bank of Korea in macroprudential policy should be strengthened.
On this day, Governor Lee noted during a keynote speech at a conference jointly held by the Bank of Korea, the Asian Development Bank (ADB), and the Journal of International Monetary and Financial Issues (JIMF) in the Bank of Korea's annex in Jung-gu, Seoul, that "the Bank of Korea does not have direct macroprudential policy tools or micro-supervision authority, unlike major countries, which raises concerns about the responsiveness and effectiveness of policy responses in case of discrepancies regarding the intensity or direction of policies during coordination with the government."
In Korea, the Financial Services Commission is responsible for establishing microprudential policies, while the Financial Supervisory Service is responsible for enforcement. However, in major countries, the Central Bank intervenes directly. For example, the central banks of the United States, the United Kingdom, France, New Zealand, and the Netherlands all possess microprudential policy tools.
Macroprudential policy refers to measures designed to prevent and alleviate financial imbalances such as skyrocketing asset prices, excessive credit expansion, and systemic risk. It includes lending regulations like the loan-to-value ratio (LTV) and bank capital regulations.
Governor Lee's remarks align with the recent notification from the Bank of Korea to the Presidential Committee on Policy Planning, emphasizing the need for the Bank of Korea to secure policy tools to manage macroprudential aspects and the independent inspection rights over financial institutions.
At that time, the Bank of Korea conveyed to the Presidential Committee on Policy Planning that "the Bank of Korea has a dual mandate for price stability and financial stability, but currently lacks policy tools to proactively respond to financial instability apart from interest rates," highlighting the necessity for the Bank of Korea to have related authority.
Additionally, the Bank of Korea is reported to have demanded the authority to inspect financial institutions independently, apart from the Financial Supervisory Service. Currently, the Bank of Korea can request inspections or joint inspections of financial institutions from the Financial Supervisory Service, but conducting inspections independently is not possible.
Meanwhile, the conference is being held over two days starting from the 16th, themed "Fiscal and Monetary Policies of Developing and Emerging Countries for Inclusive Growth." A total of 11 papers will be presented, focusing on enhancing the effectiveness of public policy for inclusive growth and including research and papers related to monetary and fiscal policies in emerging countries.