‘From direct purchase of government bonds to easing reserves’… Han Eun in politics

與 “Buy government bonds directly… Release reserves” Increased pressure
BOK governor endures “Direct acquisition of KTBs, not desirable”

[아시아경제 김은별 기자, 장세희 기자] Political circles pressing the government to loosen its finances are aiming at the Bank of Korea. In the process of responding to the economic shock caused by the Corona 19 crisis, the central bank is ordered to be more active, but the intensity is gradually increasing. When the market shook at the beginning of the spread of Corona 19 last year, the BOK forced the BOK to buy non-excellent corporate bonds, and recently, the employment shock is also weighed on the BOK’s management. In particular, even orders are issued to hold government bonds issued by the government as they are or to release the accumulated money in case of a financial market shock. In the bond distribution market, the burden of buying government bonds issued by the government at any price, rather than buying at an appropriate amount depending on the market situation, may arise.

According to politics on the 24th, Democratic Party lawmaker Yang Gyeong-sook of the National Assembly Planning and Finance Committee announced a legislative law for the “National Disaster Overcome Win-Win Solidarity Fund” and planned to raise funds to support the self-employed, business owners, unemployed, and essential workers who were hit hard by Corona 19. In progress. Financial resources include reserves accumulated by the BOK. Rep. Yang said at the general meeting of the committee on the previous day, “We are preparing to raise financial resources by lowering the proportion of reserves that the BOK will accumulate to the level of 10%.” Currently, the BOK accumulates 30% of its net income as legal reserves and pays the rest as government treasury.

There was also an opinion that the BOK should immediately buy government bonds issued by the government. The’Special Bill on Compensation for Loss and Win-Win for Overcoming Coronavirus Infectious Diseases’, initiated by Democratic Party Member Min Byeong-deok, issuing government bonds to finance the loss compensation and condolence money related to Corona 19, and the issued government bonds are issued by the BOK. It contains content that is directly acquired from. This means that quantitative easing is forced by the politics.

Han Eun is expressing warmth. In a report on the previous day, BOK Governor Lee Ju-yeol said, “It is not desirable to take over KTBs directly,” and said, “Concerns over financial soundness, undermining trust in the central bank, and negatively affecting external credit ratings.” Regarding the reduction of the reserve ratio, President Lee replied, “It is true that we are cautious, but we will discuss it with the Monetary Committee.” Although it has expressed its opposition, there is no way for the BOK to stop it if the ruling party pushes it away from the dominant National Assembly.

The politics’ shaking up the central bank is problematic in that it can destroy independence in the long run. In addition, whenever fiscal capacity hits its limit, it can create a climate that depends only on the BOK. Rep. Park Hyung-soo said, “The BOK has a responsibility to achieve price stability and financial stabilization by operating an independent monetary policy.” So-young Kim, a professor of economics at Seoul National University, warned, “There may be consequences for people other than the central bank to make monetary policy decisions.”

Reporter Eun-Byeol Kim [email protected]
Reporter Jang Se-hee [email protected]