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BOK chief vows support for restructuring, but cautions against misunderstandings

The head of South Korea's central bank vowed full support for corporate restructuring Monday, but warned against what he called public misunderstanding.

"The bank has repeatedly stressed that corporate restructuring is a very important task for our economy and that it will actively fulfill its necessary role in the process," Bank of Korea Gov. Lee Ju-yeol said while meeting with senior BOK officials.

BOK chief Lee Ju-yeol (Yonhap)
BOK chief Lee Ju-yeol (Yonhap)

"As discussions on corporate restructuring are now seriously underway, I ask you to once again review how to best carry out the bank's requested role," he added, according to the bank.

Lee's remarks came shortly after he was set to head to Frankfurt, Germany for the finance ministers' and central bank governors' meeting of the Asian Development Bank to be held Tuesday and Wednesday.

The top central banker stressed a need to watch out for growing uncertainties in the financial market, along with a possible liquidity crunch for local firms.

"Especially, I ask you to take part in the (government-led) consultative body on ways to boost the resources of policy lenders and actively discuss how to best pursue the goal with other related organizations," he said.

Lee, however, warned against causing a possible misunderstanding.

"I ask you to pay special care when publicly speaking about ways to increase the capital of policy lenders so that no related agency or the public will misunderstand," the BOK chief said.

The central bank governor was apparently referring to an earlier demand from the government and its ruling Saenuri Party that the bank use its exclusive right to issue new banknotes to directly take over the liabilities of state-run banks, including the Korea Development Bank, which in turn will allow the policy lenders to lend more money to more firms to help finance their restructuring.

The BOK chief has clearly expressed his opposition, also noting that such a move would be illegal under the current law.

"Looking at current conditions in the financial market, I believe local firms face no significant difficulties in finding the funds needed for restructuring," Lee has said.

Lee's view was again echoed Friday by one of his deputies.

"If the central bank has to play a fiscal role by making use of its money-minting authority, I think that there should be public or social consensus on it," BOK Deputy Governor Yoon Myun-shik was quoted as saying in a meeting. (Yonhap)