BOK Governor Shin Hyun-song Admits Inadequate Warning on Single-Stock Leveraged ETF Risks, Apologizes to Public

Bank of Korea Governor Shin Hyun-song apologized for failing to provide an adequate advance warning about the risks of single-stock leveraged exchange-traded funds.

Speaking at a parliamentary audit at the Bank of Korea in Seoul on Oct. 12, Shin acknowledged the central bank had responded inadequately to the introduction of single-stock leveraged ETFs. After Democratic Party lawmaker Jung Sung-ho asked whether the BOK had fulfilled its role during the rollout of the product, Shin replied, "We did not provide a sufficient warning. I am sorry to the public."

Shin said he had also raised the issue at a press briefing after the Monetary Policy Board's policy meeting in late May. At the time, however, the bank had not fully grasped volatility in the domestic stock market and the memory-chip sector, he said.

The Bank of Korea's Financial Stability Report, published in June, also came under scrutiny. The report said single-stock leveraged ETFs could help reduce the outflow of domestic investment funds overseas and support inflows from foreign investors.

Shin acknowledged that assessment was not appropriate given the conditions at the time. The bank focused on the potential for fund inflows from the product's introduction, while failing to sufficiently assess market volatility and investment risk.

The parliamentary audit put the spotlight on the Bank of Korea's role in carrying out advance risk assessments and issuing warnings over single-stock leveraged ETFs. Shin said the risks had not been flagged strongly enough and that the central bank's earlier assessment had been inappropriate.