Bank of Korea board changes will put new members in the majority as early as April, prompting criticism that the central bank is putting its credibility and policy consistency at risk.
Park Won Shik will join as senior deputy governor on April 8, subject to the president’s approval, the central bank said in a statement yesterday. Park replaces Lee Ju Yeol, whose term is expiring. Three other members of the seven-person body finish on April 20 and a fourth seat is currently vacant.
The Bank of Korea has kept interest rates unchanged for eight straight months as officials balance inflation risks against the threat to Asia’s fourth-biggest economy from an export slowdown. Board changes may make it harder for economists and investors to pick the next move.
“We may have five new members out of seven, a rare and undesirable situation that raises questions about policy consistency,” said Hahm Joon Ho, a professor at Yonsei University in Seoul who advised on the creation of the current board system in 1997. “The central bank’s credibility as an independent decision-making body is at risk.”
No comment was immediately available from the Bank of Korea.
Besides the scheduled replacements, one seat has been vacant since April 2010. Governor Kim Choong Soo, who said in a January interview that rates remain “accommodative” and shouldn’t stay that way for “a long period of time,” is near the half-way point of his four-year term.
New Board Composition
On Feb. 9, the Bank of Korea kept the benchmark seven-day repurchase rate unchanged at 3.25 percent.
“Although our economy is in a difficult situation, it will return to a long-term growth trend,” Kim said at the time. “We will stay on alert to price gains as inflation expectations are still considerably high.”
Three board members -- Kim Dae Sik, Choi Do Soung and Kang Myung Hun -- are scheduled to leave on April 20.
“The board change adds uncertainty to market players,” said Kim Nam Hyun, a Seoul-based fixed-income analyst at Eugene Investment & Futures.
Kim and Choi were described in March by Erik Lueth, a Hong Kong-based economist at Royal Bank of Scotland Group Plc and Kong Dong Rak, a fixed-income analyst at Taurus Investment & Securities Co., as “hawkish,” or more likely to push for faster rate increases.
Views on Policy
Kang and Lim Seung Tae voted against tightening policy in January 2011 when interest rates rose to 2.75 percent from 2.5 percent, meeting minutes showed. Kang said in an interview in June that the Bank of Korea may need to slow the pace of interest-rate increases after five such moves since July 2010 because of risks to the global economic outlook.
“Park will likely follow the governor’s will as his predecessor does and the rest of the board may be filled with doves supporting the government’s view,” Eugene Investment’s Kim said.
Board members are appointed by the president on the recommendation of the bank, government departments or industry. For the April change, the BOK, Finance Ministry and Financial Services Commission are to recommend the replacements.
The Korea Chamber of Commerce and Industry, responsible for recommending a person to fill a seat vacant for two years, is still considering candidates, Sohn Young Ki, a director at the chamber, said today.
In other moves at the central bank, chief economist Kim Jun Il and directors general Kang Juno, Kang Tae Soo and Kim Jong Hwa will become deputy governors in April, the central bank said in the statement.