Who will become next central banker?


Kim Kwang-doo Seogang University professor	Kim Seok-dong Former FSC Chairman	Kim Joon-kyung KDI President


Lee Duk-hoon Former Woori Bank CEO	Cho Yoon-je, Seogang University professor	Park Chul, Former BOK Deputy Gov.

Expertise in monetary policy, global mindset required for new chief

By Kim Rahn

About 40 days before Bank of Korea (BOK) Governor Kim Choong-soo's term finishes, his successor has still not been decided on yet.

Cheong Wa Dae says it is searching for the right person, but time is ticking away. It is contrary to the situation in the United States where President Barack Obama named Janet Yellen as the new Federal Reserve chair in October, about four months before her inauguration.

The new BOK chief needs to undergo a National Assembly hearing, a new procedure for appointment following a revised law. Considering about 30 days may be spent in the process, President Park Geun-hye should decide a nominee by the end of this month for the new governor to start his (or her) term on April 1.

People in the financial market are playing guessing games, talking about possible candidates ranging from scholars and ex-BOK members to former and incumbent bureaucrats.

Rumored candidates

In academia, professor Cho Yoon-je at Sogang University's Graduate School of International Studies is the most talked about. He has developed insight in global finance through his previous career as an economist at the International Monetary Fund and the World Bank.

He was also the presidential advisor on the economy during the Roh Moo-hyun administration, and is currently a member of the National Economic Advisory Council (NEAC) for President Park.

However, his outside director job for Tongyang Securities may become a weak point, as the brokerage house and its parent company, Tongyang Group, caused huge financial damage for retail investors last year by selling corporate bills without giving enough information about the group's poor financial condition.

Another candidate from academia is Kim Kwang-doo, chair professor at Sogang University and the chairman of the Institute for the Future of the State, a think tank for the President.

Kim laid ground for the Park administration's economic policies while working for her election camp, having a good understanding of the government's philosophy.

But some point out that he is not an expert in monetary policy.

Among bureaucrats are former Financial Services Commission (FSC) Chairman Kim Seok-dong; NEAC deputy chief Hyun Jung-taik; and Korea Development Institute (KDI) President Kim Joon-kyung.

The former FSC chairman had held key positions at the finance ministry, and is said to have a strong drive in carrying out policies. But some worry that his close ties with the ministry may infringe on the BOK's independence.

Hyun is a key person in Park's economic policy, while KDI head Kim is an expert in finance and macro-economy; and his father had strong ties with the President's father, former President Park Chung-hee.

However, in appointing a former bureaucrat President Park may face criticism that the government is attempting to control the central bank's monetary policy.

From the finance sector is Lee Duk-hoon, an ex-Woori Bank CEO and former member of the BOK's monetary policy committee. He is said to have a strong work ethic, but has not shown a good performance in his latest business, Keystone Private Equity, leaving the firm late last year.

Some former BOK senior members are possible candidates, including former senior deputy governors Park Chul and Lee Joo-yeol. They have an advantage as they are well aware of the organization and its monetary policy.

However, Park has been away from the BOK for too long as he retired in 2003, while Lee openly criticized current Governor Kim's reform drives when he left the bank.

Qualification for top central banker

Experts say the new BOK chief will face many challenges amid the rapidly changing global financial environment. They say the role of central banks and the traditional concept of independence have been changed since the global financial crisis, with more active participation in economic policies required.

Professor Shin Kwan-ho at Korea University said expertise in monetary policy is the basic requirement. Besides that, a BOK head now has to have a global mindset, he said.

"A country's monetary policy these days is linked to international financial conditions and other countries' policies. The BOK may have to cooperate with other central banks. So it will be better if the top central banker has a global mindset and connections."

Regarding the central bank's independence from the government, Shin said the concept of independence has become ambiguous since the global financial crisis, as many central banks have worked together with their governments for economic recovery.

"The new chief may not be able to insist on blind independence. The person will have to create a balance between work which the BOK has to carry out independently and that which it has to cooperate in with the government," he said.

Incheon National University professor Hahm Jeong-ho said central banks now have to play a more active role in economic recovery and job creation.

"The BOK has focused too much on price stabilization, its first duty prescribed by the law. However, a new chief should try to shift the paradigm according to the changing times, so that the BOK can play more of a role in creating jobs, expanding fundamentals for economic growth, and setting up infrastructure for financial markets," he said in a symposium held in Seoul last Thursday.

Shin emphasized communication with the market as the new BOK chief's qualification.

"Monetary policy can become more effective when the market understands it. So the new governor will have to make the policy transparent and clearly understood," he said.