Parliamentary committee passes bill to widen BOK's role

(ATTN: CLARIFIES para 2; UPDATES with more details, response from regulator in last
3 paras)
SEOUL, Dec. 7 (Yonhap) -- A parliamentary committee approved a bill Monday to
beef up the Bank of Korea (BOK)'s role in coping with financial instability and
give the central bank limited authority to investigate practices at local
financial firms.

The legal revision by the Strategy and Finance Committee of the National Assembly
is aimed at allowing the BOK to play a wider role in enhancing financial
stability in the face of turmoil. The bill is subject to approval by the
parliament's judiciary committee.
The current law regulating the BOK's activities was last 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 (FSS), the
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 along with its main goal of curbing inflation.
The bill allows the central bank to launch a probe into practices at local banks
on its own if the FSS refuses to conduct joint inspections without proper
reasons. Under a preliminary deal clinched in September between the two bodies,
if the central bank requests a joint inspection after its monetary policy meeting
approves it, the watchdog should launch the investigation within one month.
However, the bill also imposed more responsibility on the central bank. For
example, its must now submit its policy meeting minutes to the National Assembly.
The government and the financial regulator opposed the revision this year, saying
the current supervisory system is not seriously flawed when it comes to dealing
with financial turmoil.
"It is regrettable that the bill was passed by the committee," Chin Dong-soo,
chairman of the Financial Services Commission, said in a statement. "The results
that came out run counter to the global trend in discussion over supervisory
rights."
sooyeon@yna.co.kr
(END)