Moves to Boost Economy
FSC Chairman Jun joins the MOSF in calling for interest rate cuts to boost the economy
Chairman Jun Kwang-woo of the Financial Services Commission (FSC) said the foreign exchange market should be stabilized as much as possible and interest rates should be reduced.
During a meeting with reporters to explain his trip to the United States on April 23, the FSC chief said interest rates should be set by the Monetary Board of the Bank of Korea, the central bank. But the fact that Jun made the remarks as the FSC chairman, stressing the need for lower interest rates to stabilize the financial system, would not be taken lightly by both financial and economic ministries and the financial industry, reports said.
Financial sources take it as a sign that both the FSC and the Ministry of Strategy and Finance speak with one voice on the necessity of cutting interest rates in order to spur economic growth, reports said.
Some quarters of the financial community didn't see the FSC chairman's remarks as justified and argued that it was an attempt to pressure the monetary authorities to cut the benchmark rates to be in step with the MOSF and should, therefore, stop making such statements.
The FSC chairman also said former government officials who became heads of government-run financial organizations may be able to serve the remainder of their terms. Jun's statement shows that CEOs of a number of such public financial entities including the Industrial Bank of Korea, the Korea Deposit Insurance Corp. and the Korea Asset Management Corp. would be able to keep their jobs until the end of the term.
Jun said the financial market has to have a stable foreign exchange market as viewed from the macroeconomic standpoint and interest rates should be cut in consideration of various external conditions.
He compared the sudden jolt in the economy to bleeding and the inflation to high blood pressure. He said the bleeding should be stopped first and then the high blood pressure should be treated. A cut in interest rates should come first if the treatment is to successfully treat the conditions mentioned above.
What he meant to convey was the interest rates should be lowered to spur economic growth at the risk of some degree of inflation.
Jun's remarks have been considered very unusual as the top official of the FSC. MOSF officials, who are in charge of macroeconomic policies often make statements about the interest rates, but not FSC officials whose job is to supervise the financial markets.
The FSC vice chairman has the right to attend the monetary board meeting and make remarks, but the possibility is low for him to talk about interest rates at the meeting.
Jun's remarks on the necessity to reduce interest rates was meant to be in lockstep with the MOSF and give MOSF Minister Kang a boost in his efforts to spur economic growth, which is likely to become sluggish from the second half of this year. The MOSF plans to cut interest rates and draw up a supplementary budget to keep the economy from getting sluggish.
The FSC chairman's remarks that the banks'difficulties in securing foreign exchange funds is bearable yet is also seen as an indication that the FSC agrees with the MOSF on the matter.
Chairman Jun also listed the management capability, professionalism and understanding for the current government's philosophy on governing as conditions for retaining the current CEOs of government-run corporations.
He also said the remaining terms of office and management results so far are also important factors for keeping or replacing those CEOs, an indication that not all CEOs of state-run firms will be discharged.
"Some former government officials who now run state-controlled firms are well qualified,"he said. nw
Chairman Jun Kwang-woo of the Financial Services Commission.