BOK governor‘s sorry self-reflection

By Oh Young-jin

Bank of Korea (BOK) Governor Kim Choong-soo made an interesting point when he met a group of bank CEOs during their monthly consultation Friday morning.

“Ironically, it is when things go well that problems arise,” he observed, referring to the record-high profit posted by the four financial holdings firms of Woori, Kookmin, Shinhan and Hana.

He said that a crisis often leads one to look back and try to solve it, in the process strengthening his problem-solving ability.

Although Kim didn’t show any indication that his remarks reflected his own situation, few would blame him for doing so, considering the plight he faces.

He is under fire for losing the chance to fight inflation last year. Last year was a good time when he could use his strongest tool _ a key rate change _ in order to tame consumer prices. He sat on his hands, hinting at a rate hike without translating his words into action.

As a believer proven by his actions and words in the supporting role of the central bank to the government, Kim backed the government’s effort to keep the economy growing even at the expense of rising consumer prices. His efforts didn’t work well as inflation surpassed the government’s target for most of last year.

This month, he kept the rate unchanged at 3.25 percent for the eighth straight month.

Now is a bad time for Kim because he is seen as not being able to modulate the rate, even if he wants to.

Trade surpluses, the economy’s key pillar, went into minus territory in January and this could be another deficit month.

With that pillar gone, any rate hike could further destabilize the economy. The markets almost uniformly expected the BOK to freeze the rate in the coming months.

By the standard of his “good time-bad time” observation, it is about time for Kim to come up with a problem-solving habit.

Can he find a way out of his plight?

It doesn’t seem easy because he is also facing pressure from inside regarding his personnel reshuffling plan.

To be fair, it is not Kim’s fault but his plan, aimed at bringing new blood to the organization, that is facing a great deal of opposition from the BOK bureaucracy as it regards the boss as a “foreigner” who will leave upon the end of his tenure.

Strategically, his reform move comes at a time when his credibility as BOK leader is in doubt.

Perhaps the greater the crisis, the better the solution.