BOK chief urges law revision for better crisis management

SEOUL, Sept. 17 (Yonhap) -- South Korea's top central banker on Thursday called
for legal revisions to be enacted this year that would enhance the Bank of
Korea's (BOK) role in coping with financial and economic instability.
The current law regulating the BOK's activities was revised in 1998, making price
stability the central bank's top priority while its authority to supervise local
banks was transferred to the Financial Supervisory Service, the country's
financial watchdog.
But the global financial rout, sparked by the collapse of Lehman Brothers last
year, has drawn calls to revise the law so as to strengthen the BOK's role in
stabilizing the financial market and giving it limited authority to investigate
practices at local banks.
"Under the current law, it is difficult for the central bank to aggressively
respond to a crisis," BOK Gov. Lee Seong-tae told lawmakers.
The finance ministry opposes the law revisions this year, saying it would be
better to deal with the issue next year as the country is still grappling with
the economic downturn.
"The government shares the view about the necessity to revise the law, but it is
currently not desirable to push for the move," Finance Minister Yoon Jeung-hyun
told reporters.
The finance ministry and the financial watchdog have expressed opposition to such
measures, saying the current supervisory system is not seriously flawed when it
comes to dealing with financial turmoil.
The South Korean economy grew 2.6 percent in the second quarter from three months
earlier on the back of massive fiscal spending, fueling optimism that Asia's
fourth-largest economy is recovering at a faster-than-expected pace.
The government has said it is still premature to withdraw stimulus measures put
in place to bolster the slumping economy, saying that it will keep "expansionary"
policies until the economy shows signs of a full-fledged recovery.
But after September's rate-setting meeting, BOK Gov. Lee hinted that the bank
would hike the rate if housing prices continue their upward trend. It cut the
rate by a total of 3.25 percentage points to a record low of 2 percent between
October and February.
sooyeon@yna.co.kr
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