[Column] The Bank of Korea's 'Soulless Data'

[Image source=Yonhap News]

[Asia Economy Reporter Haeyoung Kwon] "It just makes me give a hollow laugh at soulless materials."

This is a blunt comment from a financial authority official regarding the press release titled "Extension of the Final Implementation Period of Basel III Regulatory Framework" issued by the Bank of Korea the day before. The content states that the Basel Committee on Banking Supervision (BCBS) has extended the implementation period of Basel III by one year, from the original 2022 to 2023. The Bank of Korea mentioned that with this extension, "domestic banks will have reduced regulatory compliance burdens, enabling them to strengthen financial service support in response to COVID-19."

Just a day earlier, the Financial Services Commission announced that it would advance the introduction of the credit risk component, a core part of Basel III, to ease regulatory burdens on domestic financial companies and expand their funding capacity. Due to the BCBS decision, the implementation of other Basel III components has been delayed. However, the Bank of Korea, when conveying this information the next day, presented a contradictory interpretation that financial support would actually be strengthened. This is an overstatement by the Bank of Korea.

Commercial banks are responding with disbelief. While it could be seen as a simple mishap, it once again reveals the Bank of Korea’s unique style, somewhat detached from the realities of the financial sector during a critical time. A bank official pointed out, "The Bank of Korea’s extension of the Basel III implementation period and the strengthening of financial service support for COVID-19 response have nothing to do with each other," adding, "It seems the Bank of Korea just copied the English material as is."

Especially as banks have recently expressed disappointment with the Bank of Korea’s financial market responses, dissatisfaction has erupted over such careless materials. Due to COVID-19, companies are pushed to the brink of bankruptcy, and banks are also collectively sharing the pain. This is because they empathize with the government’s urgent recognition of the situation, which calls for actively purchasing corporate bonds, commercial papers (CP), and stocks despite the risk of losses to save companies.

However, the Bank of Korea insists on the impossibility of directly purchasing corporate bonds and CPs, citing the Bank of Korea Act as an excuse. Unlike the central banks of the United States and Japan, it only emphasizes the soundness of the lender of last resort and remains passive. The reason the Bank of Korea’s "absurd" press release from the day before cannot be overlooked is that it once again overlaps with the Bank of Korea’s complacent and unrealistic situation awareness. The words of a financial authority official come to mind again: "I worry that they will only respond belatedly after a company goes bankrupt."