Asian economies should step up financial integration: BOK chief

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SEOUL, Nov 3 – South Korea’s top central banker on Monday called for Asian economies to step up financial integration to boost investment financing and risk sharing at a time when the global economy faces lingering uncertainties.

“The most important benefits expected from financial integration include easier investment financing and risk sharing through the diversification of investment opportunities,” Bank of Korea (BOK) Governor Lee Ju-yeol said in a pre-released opening address at a joint conference held with the International Monetary Fund.

The BOK chief said such a move will also contribute to boosting financial development as well as widen access to financial services, thus increasing domestic demand and reducing external imbalances.

Lee’s remarks come at a time when economies around the world are fretting amid weak growth and uncertainties over the impact of the U.S. Federal Reserve’s rate normalization.

The BOK governor noted how previous regional efforts aimed at enhancing economic resilience against external shocks — such as the Chiang Mai Initiative, a financial safety net — have led to progress both in terms of quality and quantity.

Lee, however, said that caution should be taken with financial integration, citing negative impacts such as considerable cost, constraint on monetary policy effectiveness and intensification of potential negative shocks.

In order to achieve a successful integration, the BOK governor said countries should first prepare policy frameworks designed to boost their financial resilience as well as bolster multilateral regional financial safety nets, citing currency swaps as good examples.

The joint conference titled “Future of Asian Finance: Financial Integration and Implications for Macroeconomic Performance in the Region” will be held in Seoul for two days on Nov. 3-4.