New BOK Chief Shin Pledges Tighter Oversight of Hedge Funds, Crypto in Debut Speech

Shin Hyun-song, the new governor of the Bank of Korea, said at his inauguration on April 21 that he would strengthen macroprudential oversight by stepping up monitoring of nontraditional financial products such as hedge funds and cryptocurrencies. He also said he would discuss ways to expand the central bank’s role in safeguarding financial stability.

At the ceremony held at the BOK annex in central Seoul, Shin said the central bank would improve access to information on the non-bank sector, given its growing size and rising interconnectedness across markets. He said the scope of analysis should be broadened to cover non-bank institutions’ off-balance-sheet transactions and nontraditional financial products.

Shin also pledged to strengthen the BOK’s early-warning function on financial stability. The central bank will make more active use of market-price indicators alongside existing prudential gauges, he said. Those indicators include stock prices, bond yields, the won-dollar exchange rate and credit-default swap premiums. He added that the BOK would discuss with relevant agencies ways to strengthen the role of central banks in maintaining financial stability.

Shin said the need to closely monitor domestic and global financial markets has grown. Boundaries between banks and non-banks, as well as between domestic and overseas sectors, are breaking down rapidly, he said. Financial markets are also becoming more tightly linked with asset markets, amplifying their spillover effects on the real economy. As a result, the existing framework alone is no longer sufficient to fully identify and respond to risks in the financial system.

Beyond financial stability, Shin listed other policy priorities including price stability, preserving trust in the currency and the stability of payment and settlement systems, and providing policy recommendations for structural reform.

He said uncertainty over the paths of inflation and growth has increased because of supply shocks stemming from the war in the Middle East. The BOK will pursue both price stability and financial stability through prudent and flexible monetary policy, he said. Shin also said the central bank would continue efforts to improve the effectiveness of monetary policy, review its tools to ease complex trade-offs among policy variables and coordinate with the government.

Shin also pledged to push for the internationalization of the won to preserve confidence in the currency in an increasingly globalized and digital financial environment. His plan includes 24-hour foreign-exchange trading and the construction of an offshore won settlement system to improve the accessibility and stability of FX trading in line with global standards. The BOK also plans to expand the use of deposit tokens through the second phase of Project Hangang. Shin said the internationalization of the won, payment and settlement innovation and the macroprudential framework should form a three-pronged axis capable of generating synergies with the government.

Shin also signaled he would continue structural-reform research led by former Governor Rhee Chang-yong. Structural problems are a key variable shaping the conditions for monetary policy operations, he said. They are not separate from monetary policy but an important part of it.

Shim Sung-mi, Hankyung reporter smshim@hankyung.com