Monetary chaos“The government or the National Assembly will come up with a plan,” said former Bank of Korea Gov. Park Seung when asked about the reshuffle of the Monetary Policy Committee last month. Park said that problems are evident, and that related authorities would have to take action. Unfortunately, things fell short of his expectations.
On March 28, four candidates for the next Monetary Policy Committee were named. Four members whose four-year tenure expires April 20 will be replaced. The Monetary Policy Committee is an apparatus that reviews and determines monetary and credit policy such as adjusting interest rates. In order to lower the interest rate, at least five of the seven members must be in attendance, and half of them must vote for the adjustment. The direction of the monetary policy depends on the tendency of the five appointed members besides the governor and the deputy governor. When four new members join the committee at once, the stability and predictability of monetary policy are affected.
The government has prepared a device to avoid such major changes, but things went wrong in 2010. The Lee Myung-bak administration attempted to appoint a pro-administration figure to the vacancy left by Park Bong-heum, and when met by public outrage, the seat remained vacant for two years. So from 2012, four members had the same term. Four years ago, it was determined that four members should be replaced at once. At this rate, four years later in 2020, five of the seven members will be replaced, since the current tenure of the deputy governor ends in 2020.
Politicians recognize the gravity of the issue. In August 2015, a revision of the Bank of Korea Act was submitted to spread out the terms of the Monetary Policy Committee members. But the bill was not processed in time, and while it was neglected by the National Assembly, the reshuffle became a reality. A Bank of Korea official who wished to be unnamed said that the revision was not likely to be passed by the 19th National Assembly: “In order to resolve the tenure issue, we had to resort to an irregular trick to intentionally leave one or two seats vacant and fill them a year or two later.”
While the members of the Monetary Policy Committee are experts on the economy, the new members would need considerable time to learn the job. One member said, “Understanding the duty is not as easy as it seems. It takes about six months to thoroughly comprehend the work.”
Naturally, we cannot help but worry about the possibility of mistakes by the Monetary Policy Committee with new members. If the committee misjudges the economic situation and makes a bad decision, the consequences would be disastrous. The Bank of Korea governor would become more influential, and some members would only follow his opinion. This would invalidate the committee’s reason for existence.
The government and the National Assembly need to work on forming a stable committee. There are many risk factors at home and abroad. We cannot afford the Monetary Policy Committee risk that shakes up the Korean economy every four years.
*The author is a business news reporter for the JoongAng Ilbo.
BY HA NAM-HYEON