Money for Restructuring
Bank of Korea governor Lee Ju-yeol said on May 2 that the central bank will play an important role in the upcoming corporate restructuring processes in certain sectors. Immediately after that remark, Vice Minister of Strategy & Finance Choi Sang-mok said that both the South Korean government and the Bank of Korea will do their part in recapitalizing state-run banks to be prepared for financial instability during the processes and seeking the best way by looking into their various options.
On the previous day, Deputy Prime Minister Yoo Il-ho put pressure on the central bank by saying, “I am trying to find out what is the best way to prepare financial resources for the corporate restructuring and my conclusion so far is quantitative easing.” It seems that the Bank of Korea decided to respond to his request as its objection to quantitative easing, called for by President Park Geun-hye herself, could be seen as a kind of revolt.
Under the circumstances, the Deputy Prime Minister and the governor of the central bank are expected to discuss specific measures for the recapitalization of state-run banks, the size and timing of quantitative easing, etc. Their first meeting to that end is likely to take place on May 4 in Frankfurt, Germany with both staying there for this year’s annual meeting of the Asian Development Bank, ASEAN+3 Finance Ministers and Central Bank Governors Meeting and that among South Korean, Japanese and Chinese finance ministers and central bank governors. Some experts are pointing out that the central bank’s decision might trigger a controversy over the independence of the central bank.