Central bank governor calls for resilience, preparation

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Central bank governor calls for resilience, preparation

On Monday, Korea’s central bank chief said that it is necessary to build resilience against fallout stemming from financial jitters in foreign countries.

“We must enhance the overall resilience of the regional economy so that sudden changes in capital flows triggered by external shocks do not lead to systemic risks,” Bank of Korea (BOK) Gov. Lee Ju-yeol said in a conference in Seoul.

As a small, open economy, South Korea is very susceptible to external financial challenges, such as monetary normalization of the United States or a stock rout from either the United States or China.

In the Korean stock market, foreign ownership stands at some 35 percent of market capitalization.

“To this end, we must reinforce our capacities and policy space to properly respond to external risks,” said Lee. “This may be done by improving current account balances, holding sufficient foreign reserves and enhancing exchange rate flexibility.”

He also said the international community should make concerted efforts to beef up financial safety nets in Asia in a way to buffer possible downside risks coming from other side of the world.

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