Taking Bank of Korea helm, crisis-era veteran pursues ambitious won overhaul

New Bank of Korea Governor Shin Hyun Song launches a delicate mission to elevate the won's global status while maintaining financial stability. | Contesto: cronaca

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• Taking Bank of Korea helm, crisis-era veteran pursues ambitious won overhaul

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SEOUL – Shin Hyun Song formally assumed the governorship of the Bank of Korea this week, immediately outlining a defining and formidable challenge for his tenure: to engineer a significant elevation of the South Korean won's role in the global financial system while meticulously avoiding the destabilizing capital flows that have historically plagued such ambitions. The appointment of Shin, a respected economist with deep experience in financial crisis management, signals a strategic pivot for the nation's central bank. His mandate moves beyond traditional monetary policy to encompass a long-term structural project for the national economy. The goal is to reduce South Korea's heavy reliance on the U.S. dollar for trade and finance, a dependency that exposes its export-driven economy to external volatility and exchange rate risks beyond its direct control. Historically, efforts to internationalize a currency involve encouraging its use for trade invoicing, as a reserve asset for foreign central banks, and in global debt markets. For the won, this path is fraught with inherent tension. Promoting greater foreign ownership of won-denominated assets and encouraging international use could lead to large, unpredictable inflows and outflows of capital. Such "jolting" movements can overwhelm domestic financial markets, cause extreme currency volatility, and complicate the central bank's primary mission of ensuring price stability. Shin's background as a crisis-era veteran is seen as crucial for navigating this tightrope. His understanding of systemic risk and financial market fragility, honed during previous periods of global turmoil, is expected to inform a cautious, phased approach. The strategy will likely focus on incremental steps, such as expanding currency swap lines with other nations, facilitating more offshore won trading hubs, and making Korean government bonds more accessible to foreign investors through improved market infrastructure and liquidity. The implications of success are profound. A more global won would lower transaction costs for Korean corporations, provide the government with greater monetary sovereignty, and potentially enhance South Korea's...

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Categoria: cronaca