Market Principals Not Public Good Touted by Bank

Commenting on the slow pace of change and innovation in the financial industry, the central bank chief said Thursday that financial institutions should be more market-oriented. "Society needs to recognize that business principles, rather than public purpose, is the basis of financial institutions," said Governor Chon Chol-hwan of the Bank of Korea.

Mr. Chon said the "backwardness" of the financial market is largely due to the emphasis on serving the public good, which has been placed on the financial firms. The market should drive change, he said, and "should regulate itself through the actions and decisions made by the participants, rather than being confined to government restrictions." It is urgent that financial firms incorporate internationally accepted standards in independent audits and other evaluations, he said.

"The central bank will keep monetary policy that favors market mechanisms," Mr. Chon said. "But if markets are distorted by speculation, it will intervene."

Mr. Chon also expressed concerned over risks that come with derivative financial instruments. "The firms must put internal control in place to counter these risks," he said.

by Cheong Chul-gun