Choosing a trusty guardian

Bank of Korea Governor Lee Seong-tae’s term expires at the end of March. Many big names have been mentioned as the next governor. The supreme head and final arbiter of the nation’s financial policies will be appointed by the president following deliberations with his cabinet. Lee’s successor should stand at the forefront of the field and devise a credible exit strategy. It would be natural to appoint a faithful and competent figure with deep insight into key trends in the national economy who can regain the trust of the financial markets, followed by strict examination. Minister of Strategy and Finance Yoon Jeung-hyun even said, “It makes sense to insist that a personnel hearing should be introduced to confirm the appointment of a new governor.”

Of the 23 BOK governors, the only one to be in office for two terms was Kim Sung-hwan, who served from 1970 to 1978. Central bank governors from the United States and Europe’s largest economies often serve for more than 10 years. However, Korea is in a different situation. Since the 1997 Asian financial crisis, three governors have been assured a four-year term. However, in many cases, they sank into lame-duck status in the one or two final years. Hence appointment decisions have been made based on political calculations, and governors have tended to be harshly criticized for any errors during the regime change. This is the real reason they end up serving a single term.

The German government once was able to set the agenda of the Bundesbank, the nation’s central bank. In emergencies, it even had the authority to suspend the bank’s decision-making powers for a two-week period. However, Karl Otto Pohl, president of the Bundesbank from 1980 to 1991, maintained political independence. When the chancellor of Germany criticized the bank’s financial policies, he replied angrily that the German mark fell under his responsibility. Even global hedge fund firms refrained from speculating in the German mark, fearing any possible countermeasure.

We need a good leader who can confidently set a direction for the future. He should have his own voice in every issue and lead the nation’s financial policies in a sustainable manner. Personnel hearings should be strict enough to verify the competency of all candidates and their policies. On the other hand, a governor with an excellent job performance evaluation should also serve two or more terms in office, to win the trust of the people and the markets. The National Assembly and the government should amend the relevant laws to introduce personnel hearings for the BOK governor. Of course, this should not end up being a rough-and-tumble mixture of reckless criticism.