S Korea central bank to beef up risk management to head off volatility

[SEOUL] South Korea's central bank said on Monday it will strengthen its risk management processes and take pre-emptive steps to buffer the economy from any future financial crisis.

The Bank of Korea will consider using its massive foreign reserves to offset global markets volatility, but will do so only in a crisis situation and after assessing the costs of liquidating its assets, it said in a regular report to parliament.

The BOK said it would aim to stabilise local markets if the Japanese yen weakens sharply, global oil prices tumble anew, or the normalisation of interest rates in the United States sparks global financial turbulence.

South Korea currently has the world's seventh largest foreign reserves.

Commenting on the domestic economy, the central bank said the recovery remains weak amid low confidence, but expects to see steady improvement as the global economy rebounds on low oil prices and easy monetary policy in key economies.

The BOK took a cautious approach when holding its policy rate steady at 2.0 per cent for the fourth straight month last week, it said, noting risks to financial stability from the recent surge in household debt.

Bank of Korea Governor Lee Ju Yeol is expected to answer lawmakers' questions on the central bank's policy and current economic issues throughout Monday's parliament session.

REUTERS