New BOK chief promises shake-up

New Bank of Korea Governor Lee Ju-yeol, second from right, stands with senior officials of the central bank during his inauguration ceremony at the bank’s building in central Seoul, Tuesday. / Yonhap

By Kim Rahn

The new chief at the Bank of Korea (BOK) hinted Tuesday that he will reform the organization to rebuild the central bank’s traditional values and standards, which have been neglected under his predecessor.

The bank’s monetary policy may not change dramatically unless economic situations largely change, economic analysts expect.

Governor Lee Ju-yeol took office Tuesday for a four-year term. It marks a comeback, two years after he retired from the BOK in 2012 as a senior deputy governor after 35 years of service there.

In his inauguration speech, Lee said he would review the efficiency of current management and performance systems from scratch.

“Among various reform drives, I’ll develop positive ones and immediately reform those that damaged job efficiency despite the good intent,” he said. “I’ll also look into whether the BOK’s organizational structure is suitable to carry out its core function, such as monetary policy.”

That comment again showed his uneasiness with his predecessor Kim Choong-soo’s radical reform drives.

Lee criticized Kim in his farewell speech in 2012 by saying many BOK members were hurt as their years-long reputation and BOK’s traditional values were not recognized amid the global and reform measures.

For personnel affairs, it seems Lee would prefer the traditional seniority system to Kim’s performance-based one.

“The most important standard in personnel affairs will be performance and reputation that the person has built for years. In that way, BOK staffers can get motivation to train themselves and contribute to the organization’s development from a long-term perspective,” he said.

Drastic policy change unlikely

Lee said he hopes to help the economy onto a stable recovery track while maintaining price stability.

“We need to study whether the current monetary policy system is suitable for not only the goal of stabilizing price, but also new demands of the time such as financial stabilization and growth. To accept the call for the BOK’s new roles, we’ll have to discuss how to change its policy targets or methods,” he said.

Regarding this, analysts said Lee is unlikely to bring a huge change to the BOK’s monetary policy.

“Lee is expected to maintain the central bank’s steady monetary policy,” Matthew Circosta, economist at Moody’s Analytics, said. “President Park Geun-hye’s appointment of Lee, who has held various senior positions at the BOK for 35 years, will ensure a smooth leadership transition and provide predictability and stability to the monetary outlook.”

JPMorgan also said that in the parliamentary confirmation hearing last month, Lee relieved market concerns that he might be relatively hawkish.

“In an almost six-hour-long session, Lee sounded neutral and deliberately vague in commenting on key policy issues, which in turn gave the impression that he would stay flexible for now, having few intentions to take surprising action unless growth conditions change unexpectedly,” economist Lim Ji-won at JPMorgan Chase Bank’s Seoul branch, said.

Market watchers also expect better communication between the BOK and the market as Lee himself has stressed it.

Lee said, “The key of monetary policy lies in managing economic players’ expectations effectively, and this is attainable when the public trusts the central bank. I’ll boost the effectiveness of the policy through consistent and predictable policy management and effective communication.”

Circosta said, “The BOK’s communication strategy should improve under Lee. He is expected to provide markets a clearer direction on policy directions, a positive shift from the often unpredictable Kim.”