Challenges for new governor

Lee Joo-yeol, former deputy governor of the Bank of Korea, was nominated yesterday to become the head of the central bank. After having held major posts at the BOK throughout his career, he is supposed to lead Korea’s monetary policies for the next four years. As a senior aide to the governor during the global financial meltdown in 2008, his job was to stabilize our financial market. While serving as an executive member of the Monetary Policy Committee at the BOK, he was considered a “moderate” advocate of the free market. Considering the qualifications required of the top position - such as a global mindset, expertise and conviction - he deserves a positive response from financial markets.

Lee faces daunting challenges. First of all, the new governor must go through a confirmation hearing at the National Assembly; he is the first nominee to do so, due to a 2012 revision to the laws regarding the Bank of Korea. The screening process will offer an opportunity to redefine - and reestablish - the desired role and status of the governor amid increasingly turbulent global financial markets. He has to tackle external challenges, such as the troubles facing the world economy due to the U.S. Federal Reserve’s tapering off of its quantitative easing, while confronting domestic challenges, such as snowballing household debts, rising unemployment and an alarming drop in real estate prices. Given the gravity of the challenges, we urge him to offer guidance on the downtrodden economy based on his expertise in monetary policy.

Communication skills are just as important for reforming the Bank of Korea as expertise in monetary policy. While incumbent Governor Kim Choong-soo was well regarded for helping to raise the stature of the central bank on the world stage, he was nicknamed the “incommunicative governor” because of his critical lack of communication skills on the domestic front. Markets tend to react sensitively to even the slightest signals from the central bank. That’s why the new governor must reduce confusion in the market through cautious remarks and predictable monetary policies.

The effort to reshape the BOK must continue. The current governor struggled to create a global mindset among employees and trim the hefty privileges enjoyed by the workers despite strong internal resistance. The endeavor to revitalize the bank must continue. The new governor also needs to consider internal and external demands for monetary policies in tune with the government. Independence is, of course, important. If preoccupied with that value too much, though, it’s not good for the economy.

JoongAng Ilbo, Mar. 4, Page 30