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Financial Stability Board’s strong outreach in Global Financial resilience is expected

Korea will be the first emerging economy to host the Financial Stability Board meeting on the 20th of October, 2010. In its third plenary meeting in Basel, Switzerland, the board decided to have the fourth event in Seoul before the G20 summit. Since Korea is also the chair country of upcoming G20 forum, a Financial Services Commission official said that Korea will be able to take the lead in reforming the financial framework.

 The Financial Stability Board (FSB) was established in April 2009 as the successor to the Financial Stability Forum (FSF). The FSF was founded in 1999 by the G7 Finance Ministers and Central Bank Governors to promote stability in the international financial system. Yet, among the leaders of G20 countries, there had been a broad consensus on stronger institutional ground with an expanded membership. And this movement resulted in the creation of FSB, an extended form of FSF. In an attempt to strengthen its effectiveness, financial authorities from the G20 nations, international financial institutions and several global standard setting bodies joined the FSB as the new members. The FSB performs the initiative role to develop and implement strong regulatory, supervisory and other policies in pursuit of financial stability. 

 As a member of FSB, Korea, especially the Bank of Korea and Financial Services Commission came to have an even more crucial role. FSC is involved in FSB Steering Committee which provides operational guidance and sets the agenda in general. So FSC has been trying to boost regular meetings among the FSB leaders and to continue active discussions. One of them was the financial reform conference called “Envisioning a New Financial System: An Emerging Market Perspective” which Dong-Soo Chin, the chairman of FSC held on Sep.2 in Seoul. The conference called attention to the increasing impact of emerging markets to the world economy, paving the way for more balanced participation of emerging countries in the global finance sector.

 

 

(Sep.2th Korea-FSB Financial Reform Conference, taken from Herald Media)

In fact, a decade ago, Korea felt the tremendous pain due to 1997 Asian Financial Crisis. In the wake of 1997 crisis, Korea had no choice but to strongly restructure corporate and financial field, dealing with long-neglected structural problems hidden behind rapid growth. Passing a time of economic revitalization and renewal, Korea learned valuable lessons and now, it is positioned as one of the competitive global economies. This unique experience enables Korea to serve as a potential broker that can bridge the gap between the emerging and the advanced markets.

 Sharing Korea’s pre-experience and know-how, particularly on financial regulation reform, perspectives of emerging economies can be brought into the global reform process. Many experts admit that Asia will be the engine of future global economic growth. In order to make the emerging markets less vulnerable to external shocks, global financial safety net is strongly required and in this sense, international standards will help them free from poor financial infrastructure.

 Currently, a lot of critical financial agenda are on the FSB table. For instance, to enhance transparency among market participants, prudent oversight of capital, liquidity, leverage and risk management is necessary. Along with Basel III, which delineates the rate of bank capital buffer, Bank Levy is considered a possible measure to increase banks’ crisis management capability, although the feasibility of the proposal still remains to be seen. Furthermore, efforts to reduce systemic risk generated by interconnectedness among financial institutions worldwide led to global coordination to devise measures that cover broader range of financial markets and instruments. Systemically important financial institutions will be strictly monitored and the size of “shadow banking” such as hedge funds and off-balance sheet entities will be shrunk. New international controlling standards on hedge funds will emerge and Central Counter Parties will be installed for over-the-counter (OTC) derivatives. In addition, more standardized forms of OTC products will be used and regulation on credit rating agencies will be intensified. 

                                                                                               (Picture from the Korea Times)

The FSB will take up a vital role of making these regulatory reform recommendations to the G20 summit. Once a certain regulatory reform is approved and adopted through the Financial Stability Board and G20 forum, those international standards are to be implemented by each country. Throughout this highly critical process, Korea is anticipated to undertake a number of initiatives to assess each regulation across sectors, identify regulatory gaps and examine related issues, and reflect emerging Asian market perspective. Gearing up for the G20 summit, FSB activities are an important step in facilitating G20 reform agenda. Everyone hopes to see successful outcome from the impending FSB meeting in Seoul.

Lee, Ki Yeon (kiyeon.m.lee@gmail.com)

Press Coverage – November 18th

Le Figaro. Le Miracle Sud-coréen

Les recettes du miracle sud-coréen: Arnaud Rodier
La présidence du G20 doit permettre à Séoul de jouer dans la cour des grands:Arnaud Rodier

 Korea is gaining  positive recognition from the world .  The French daily Le Figaro journalist, Arnaud Rodier  says Korea is likely to join the list of the world’s most advanced nations by hosting the G-20 summit next year. Considering fact that G-20’s importance itself  in the world, the first Asian country as a G- summit host nation means a lot.   He also adds the government is looking for its economic momentum from the newly started eco-friendly business. This move will bring positive economic impact to Korean people. See more from  www.lefigaro.fr

Press Coverage – November 11th

Business Week Senior reporter, Rupert Walker sees Korean economy impressive rebound

 

Korea shows remarkable resilience: Rupert Walker
  

Thanks to the governments’ pre-emptive actions against global financial crisis and strong corporate earnings, Korea is seen to be now bottoming out of from global gloom. A senior reporter of Business Week, Rupert Walker said Asia’s fourth largest economy has impressed many investors by its surprising rebound, especially compared with its regional peers. The Government-led stimulus package, equivalent to 3.6% of GDP this year,helped to minimise economic contraction in economic growth. And fiscal measure for local economy will be maintained next year, said Ministry of strategy and finance, Yoon Jeung-hyun said late September. Sean Darby, a strategist at Nomura, suggested that Korea is enjoying its first self-sustaining recovery having seen Korean economy system is undergoing a structural change.   See more from www.businessweek.com

  

Press Coverage – November 12th

Distinguished professor at Harvard’s Kennedy School of Government, Joseph Nye talks about South Korea’s future direction lies ahead

 

‘Small Nation with an ever-growing voice:  Joseph Nye’

RISINGKOREASouth Korea has turned into an important middle-ranking power in global affairs.  World sees Korea discount now changing to  Korea premium. Having seen South Korea as the 13th national power country amongst G-20 evaluated by the Hansun Foundation, Not just hard power, soft power also has been being improved.  Professor Joseph emphasized the importance of strengthening soft power. He said now it’s time for Korea to jump up with more strengthened sophisticated and efficient soft power, such as ODA or successful democratic political system, etc.     See more from scmp.com

Press coverage – October 24th

ap_thailand_asean_summit2_210_24Oct09

Leaders of Southeast Asian nations join hands during a group photo for the summit, at the beach resort of Cha-am, southern Thailand, 24 Oct 2009

 S.Korea’s influence in South East Asia increases

South Korea Rising : Philip Bowring’

 Korea’s role does become more influential.  On October 24th, New York Times columnist, Philip Bowring said that Korea’s official presence in the South East Asia region will be noticeable  and its impact is expected to be  significant. He mentioned that Asean states mostly welcome more outside participants in the competition expressing the concern of high dependency on China which can trigger another economic risk. See more from nytimes.com

 

Press Coverage on the Korean Real-estate market – October 13th-14th

Mixed opinions on Korean Bubble’s threat

 

‘The Coming Korean Bubble’

house in handsOn October 13th,  Jasper Kim, an associate professor of law and finance at the Graduate School of  International Studies of Ewha Women’s University in Seoul, asserted the risk in Korean real-estate market.  She said the current situation can be compared with U.S. subprime giving 3 points: 1)continuing consumer confidence that real-estate prices will go up, 2) benefit from cheap credit and 3)traditional preferences on real-estate investment.  She worried the potential risk which still remains in Korean housing market despite the increase in  LTV ratio and DTI restriction level.

‘South Korea Doesn’t Have a Housing Bubble’

Following day, Dominique Dwor-Frecaut, a Senior Economist of the Royal Bank of Scotland, claimed against Professor.Kim’s opinion. He clarified real-estate valuation is not as bad as Professor.Kim said, according to Kookmin Bank real-estate price index, BIS report and IMF Study. He said what’s more serious is the increase in household debts, which have increased to 139% of disposable income at mid-2009.                         See more from WSJ.com