Seat on rate-setting committee has been empty for over a year
The presidential office has failed to address filling a vacant seat at the central bank’s interest rate-setting panel for 14 months despite the growing need to fight mounting inflationary pressure.
In tandem, Bank of Korea Governor Kim Choong-soo has been criticized for allegedly glossing over laws on the BOK concerning the bank’s Monetary Policy Committee composed of seven individuals. Kim has so far failed to utter any remarks calling for a speedy nomination of the panel member.
Officials at Cheong Wa Dae also have not issued official comments about the vacant seat; the country’s president appoints the monetary policymakers.
The chief central banker, on the contrary, has been defending the situation under which six of the panel members have set the monthly benchmark rate on 14 occasions between May 2010 and June 2011.
“There has been no big problem until now,” Kim has said, adding that it was inappropriate for him to comment in detail despite his position as governor.
Laws on the BOK stipulate that the Monetary Policy Committee should have seven members.
They include the BOK governor, BOK deputy governor and those recommended by chiefs of the five sectors ― the Finance Ministry, the central bank, the Financial Services Commission, the Korea Chamber of Commerce & Industry, and the Korea Federation of Banks.
President Lee Myung-bak chooses the candidates provisionally nominated from the five sectors.
The last vacant seat would be for the Korea Chamber of Commerce & Industry to nominate.
Since the latter half of 2010, the unionized workers of the central bank have urged Kim to scrap his lukewarm stance.
They also said he should be held accountable for the situation, claiming that the vacancy has been undermining the central bank’s independence.
Though views differ on how much the vacancy affects the interest rates, the prolonged vacancy seems to be triggering increasing criticism toward Kim over his policies.
A number of bond dealers and research analysts have criticized the Monetary Policy Committee and Kim for making decisions ― between rate-freezing and rate-hikes ― that ran counter to market expectations.
“It’s to the extent where anybody could easily win the betting on the rate-setting as long as they bet opposite to the market forecast,” one analyst said, declining to be identified. “It is also needless to say that the central bank has failed to tame the inflationary pressure.”
In a recent statement, the Citizens’ Coalition for Economic Justice said: “The vacant seat shows that the system of recommending monetary policymakers from the private sector has apparently been abused by the government.”
Regarding Lim Seung-tae, a current committee member recommended by the Korea Federation of Banks in April 2010, the NGO criticized the designation of a government official.
“The original purpose aimed at monetary polices through appropriate checks and balances (between public and private experts) has vanished,” it added.
By Kim Yon-se (email@example.com