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)

One great leap for Korea: the G-20 Seoul Summit

 

   The G-20 is the premier forum for our international economic cooperation that promotes open and constructive discussion between industrial and emerging-market countries on key issues related to global economic stability. By contributing to the strengthening of the international financial system and providing opportunities for dialogue on national policies, international cooperation, and international financial institutions, the G-20 helps to support growth and development across the globe.

  Korea is the first country which holds the G-20 Summit among Asian countries. It’s attributed in part to the fact that Korea has successfully overcome the latest crisis. At ‘the G-20 Seoul Summit’ held in November 2010, a statement about ‘Sustainable and balanced growth’ is to be issued. Specific plans on reforming IMF and establishing financial safety nets will be also discussed. As a chair of the G-20 this year, Korea needs to seize the chance to internationally enhance its position and demonstrate its leadership to other countries.

 

What does Korea want to achieve through the 2010 G-20 Summit ?

 The Korean economy used to be undervalued in the global market due to the so-called ‘Korea discount’ effect. Now, as a chairing country of the G-20, Korea plans to raise its profile on the global stage and turn the ‘Korea discount’ effect into ‘Korea premium’ one. To support this goal, the Financial Services Commission (FSC) has five action plans.

1. Supporting successful hosting of the G-20 Summit

  As a chair and host of the 2010 G-20 summit, Korea’s role will play an important role in bridging the gap between the advanced and emerging economies. To this end, Korea is more actively participating in global discussions on various issues and taking a leading role in international bodies such as the Financial Stability Board (FSB). The FSC also supports the ‘Presidential Committee for the G-20 Summit’ to select items for agenda and resolve differences among the countries. Especially, the FSC is making effort to build constant channels of communication among the financial authorities in Asian countries to gather opinions about financial agenda.

2. Fostering distinctive financial center

  The FSC has plan to create specialized financial centers in Yeouido, Seoul and Moonhyun, Pusan. Under this plan, the FSC formed consultative groups with local governments and is working on detailed plans for implementation. It is also in the process of improving business environment to attract more foreign financial institutions. As part of this effort, the FSC and the FSS are issuing Financial Investor Express Cards for foreign financial investors who meet certain requirements to make their immigration process much more convenient. The FSC is also working on nurturing and attracting financial experts.

3. Pushing ahead a globalization of Korea’s finance system

  Efforts to globalize Korea’s financial system are being made in two ways: exporting finance systems and attracting foreign companies. Exporting Korea’s financial infrastructure to developing countries can improve efficiency, accuracy, and transparency in financial transactions. Korea’s advanced IT technology can contribute a lot to establishing financial infrastructure in developing countries. The FSC is also supporting domestic financial institutions to go abroad and expand their business activities so that Korea can have more influence in the global financial market.

4. Improving transparency in finance

  Transparency is an important factor to determine the development of a country’s financial system. Korea’s financial authority reformed the systems related to Anti-Money Laundering Laws and System to improve it. Moreover, To increase its international role in anti-money laundering area, as a full member of Financial Action Task Force (FATF) and chair country of the G-20 Summit, the FSC is building a bridge between these two organizations to strengthen its position in the world. It also extends technical support for developing countries. In this regard, according to the request of Asia-Pacific Group on Money Laundering (APG), the FSC decided to help the Mongolia government improve its Anti-Money Laundering System.

5. Enhancing the financial supervisory services

  Equipped with a well-developed system, the FSC is working on improving its financial supervisory practices. To this end, the FSC invited external experts to create an advisory committee and to make an unbiased and objective assessment about its supervisory activities. It also strives to build a cooperation system among individual sectors to provide a more consistent and comprehensive supervisory approach.

 

  With all these efforts, Korea will take initiative in global coordination. Korea will make effort to calibrate the interests of G-20 countries in a well-balanced manner. Diplomatic leadership also needs to be shown to engage non-G20 countries into discussion. For Korea, ‘the G-20 Seoul Summit’ is a valuable chance to show the global community its leadership. Let’s hope its efforts will be crowned with success.

 

Chang-bum Choi

(incrowd@naver.com)

 

 

 

Weekly e-Briefing 5. Korea’s role in the FSB

Korea’s role in the FSB

A special guest for FSC Weekly e-Briefing, Mr. Chin, Dong-Soo, the Chairman of Korea’s Financial Services Commission and the representative of Korea’s Financial Stability Board told Korea has been selected as the host of FSB Plenary Meeting in this October.
Following issues will  be deliberated at the FSB Plenary Meeting in Korea before final decisions are made by the leaders at the G-20 Summit in Seoul;1) Improving Basel committee regulations on capital liquidity 2) Reducing moral hazard of systematically important financial institution 3) Assessing improvement of compensation practices of financial institutions 4) Discussing future plans and schedules and monitoring the progress on the implementing international standards and strengthening financial cooperation.

As the chair of the G-20 Summit as well as a member of the FSB, Korea will make every efforts to play a mojor role in achieving consensus on financial reforms and setting improved international standards. See more from http://fsc.go.kr/eng/index.jsp