New Bank of Korea Governor Shin Hyun-song held an inauguration ceremony at the Bank of Korea in Jung District, Seoul, on the 21st and began a four-year term. In his inaugural address, Shin said, "As uncertainty over the paths of inflation and growth has increased due to a supply shock from the Middle East war, we must seek price stability and financial stability through careful and flexible currency policy management."
The following is the full text of the inaugural address.
Bank of Korea executives and staff, it is good to see you.
Today I stand here having been appointed governor of the Bank of Korea. Having worked for a long time in academia overseas and at international organizations, it is an immense honor to have the opportunity to devote myself to the Bank of Korea and our economy, but the heavy responsibility comes first when I think of the duty entrusted to me.
First, I thank the former governors and all executives and staff who have dedicated themselves to the development of the national economy, and the members of the Monetary Policy Board. In particular, I express my gratitude and respect to Governor Rhee Chang-yong, who worked to maintain the stability of our economy amid difficult domestic and external conditions over the past four years and raised the stature of the Bank of Korea.
Executives and staff,
The domestic and external conditions facing our economy are not easy. Since the Middle East war, rising international oil prices have simultaneously increased upward pressure on prices and downward pressure on the economy, and the risks of high volatility in financial markets and the buildup of financial imbalances also persist.
From a longer perspective, today's global economic order is going through a period of great transition due to geopolitical conflicts and the AI technology revolution. Trade conflicts triggered by tariff policy are leading to a reorganization of trade structures, and tensions in the Middle East are once again heightening an energy crisis. AI technology has changed the industrial landscape in recent years and will continue to have a major impact on overall economic activity, including economic growth, productivity and the labor market.
Domestically, changes in the demographic structure, deepening polarization, the real estate market and household debt are weakening our economy's growth engine. It is difficult to predict how these structural problems will unfold in conjunction with changes in the global economy.
Executives and staff,
In this time of transition, we must again ask what the role of the Central Bank is.
Looking back, the history of the Central Bank has been a process of constant evolution in response to changes in the economic environment. The deposit banks that formed around European city-states in the 17th century played a central role in building trust in trade transactions and in currency by issuing credible deposits and facilitating settlement amid the proliferation of various metallic currencies, and they can be considered the predecessors of today's Central Bank. After the Great Depression in the early 20th century and the stagflation of the 1970s, the Central Bank established itself as the central axis of macroeconomic management that seeks stability in prices and growth, and after the global financial crisis, financial stability was added as an important mandate.
This evolution of the Central Bank was not the result of following established theory but a process in which experience led to theory. The challenges we face today are also tasks for which we must find answers through practice and write new theory.
In this regard, I would like to outline four priorities we will focus on over the next four years.
First, as uncertainty over the paths of inflation and growth has increased due to a supply shock from the Middle East war, we must seek price stability and financial stability through careful and flexible currency policy management.
Along with this, we will continue efforts to enhance the effectiveness of currency policy. We will reexamine policy tools to ease complex trade-offs among policy variables and will coordinate policies with the government where needed. We will also strengthen two-way communication with the market and continue to explore communication methods suited to our circumstances.
Second, we need a new perspective on financial stability.
Today, boundaries are rapidly collapsing between banks and nonbanks and between domestic and overseas institutional sectors in financial markets. They are also closely connected with asset markets, increasing their spillover effects on the real economy. With only the existing framework, it has become harder to fully identify and respond to risks in the financial system.
Accordingly, together with existing soundness indicators, we will more actively use movements in market price indicators to strengthen early warning functions. In light of the expansion of the nonbank institutional sector and stronger interconnectedness across markets, we need to improve access to information on the nonbank institutional sector and expand the scope of analysis to off-balance-sheet transactions by financial institutions and nontraditional financial products. Based on this, we will discuss with relevant institutions ways to strengthen the Central Bank's role in financial stability.
Third, in a globalized and digitalized financial environment, safeguarding trust in money and the stability of payments and settlements is also the Central Bank's mission of the era.
Internationalizing the won is an important task to establish a currency infrastructure befitting our economy's status. Together with the government, we will promote 24-hour opening of the foreign exchange market and build an offshore won settlement system to improve accessibility and stability of foreign exchange trading in line with international standards. This will promote capital and real transactions based on the won, elevate the won's international standing, and contribute to the stable development of the foreign exchange market.
In addition, we must move ahead in preparing the design of the future currency regime in response to digital financial innovation. Through Phase 2 of Project Han River, we will increase the usability of CBDC and deposit tokens, and through international cooperation such as the Agora Project, we will enhance the won's standing even in a digital payments environment. As these efforts to internationalize the won and innovate the currency regime must not undermine financial stability and therefore require safeguards, we will discuss a macroprudential framework suited to the changed environment.
In this way, we will work with the government so that internationalization of the won, innovation in payments and settlements, and the macroprudential framework form a "triangular axis" that can generate synergy.
Fourth, the Central Bank must also play an active role in our economy's structural reform tasks.
The various structural problems mentioned earlier are key variables that shape the conditions for currency policy management. As the economic structure changes, if a gap widens between economic reality and the perceptions of economic agents, it can even affect the transmission channels of currency policy.
In this regard, I believe structural factors are not a domain separate from currency policy but an important part of currency policy management. Going forward, by continuing the Bank of Korea's in-depth research and policy recommendations on these tasks, we will help guide our economy in a desirable direction.
Executives and staff,
None of the four priorities I have outlined are easy, but I am confident that with the Bank of Korea's accumulated capabilities and experience, and with everyone joining forces, we can overcome them. For these tasks to lead to results, the organization's operating methods must also change accordingly. In this regard, I would like to share a few points.
First, I will focus on creating conditions in which each of you can fully demonstrate your capabilities. As the Bank of Korea's standing rises, individual members also need to grow together. Rather than relatively small individuals within a large organization, we should strive to gather large individuals to build an even larger organization. To that end, across all institutional sectors—from research and policy to front-line operations and administration—we will broadly provide opportunities for growth and steadily work to improve organizational culture and internal management so that appropriate treatment follows.
Next, I hope the various institutional sectors within the Bank of Korea will break down boundaries and move organically. Today, the real and financial economies and the domestic and overseas economies move in tandem. Therefore, while each employee should have deep expertise in their own area, it is also important to broaden understanding of other areas to develop a comprehensive perspective. Research and policy should complement each other and deepen together. We will work so that questions arising from real policy issues lead to research, and those results in turn support the persuasiveness of policy in a virtuous cycle.
In addition, raising the use of digital technology to enhance organizational productivity is an urgent task. Experts at home and abroad commonly note that without changes in how we work, meaningful productivity gains are hard to expect. Therefore, together with you, we will look across organizational operations—including data systems, workforce management and information sharing—to find areas for improvement.
Finally, we aim for the Bank of Korea to become an organization that participates in and contributes more actively to discussions in the international community. Today, Korea is drawing attention overseas not only for K-culture but also for policy experiences such as the Bank of Korea's K-dot plot. We will create venues to actively engage in shaping discourse at home and abroad so that the research and policy experiences we have accumulated can lead to meaningful contributions in international discussions, including at the Bank for International Settlements (BIS) and the International Monetary Fund (IMF). This is both a way to contribute to the international community and a channel to find solutions for our economy within the world.
Bank of Korea executives and staff,
Our economy now stands amid uncertainty and change, and the tasks we must solve are piling up. If the Bank of Korea fulfills its role as a center of trust, it will greatly help us overcome the difficulties facing our economy.
To this end, I ask for the wisdom and cooperation of all of you. I, too, will do my best together with you.
Thank you.