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신제윤 위원장 IADI 연차총회 기조연설

2013 IADI Asia Pacific Regional Committee 11th Annual Meeting

and International Conference

 

 

May 14, 2013

 

Financial Services Commission

Chairman

Shin Je-Yoon

 

 

 

 

 

 

1. Introduction

 

Good morning, Ladies and gentlemen.

Congratulations on the occasion of the 11th IADI* Asia Pacific Regional Committee's Annual Meeting and International Conference.

* International Association of Deposit Insurers

I want to thank IADI President 저지 프루스키, Asia-Pacific Regional Committee Chairman 히로유키 오바타, Secretary General 카를로스 이소아드 and President of the Korea Deposit Insurance Corporation 김주현, for inviting me to this meaningful event.

Also, let me extend a warm welcome to all the distinguished guests and experts from home and abroad.

In my speech today, I want to talk about two topics.

First, the role of deposit insurers as a key pillar of the financial safety net.

And second, the need for greater international cooperation and the role of the Asia-Pacific region.

 

 

2. The role of deposit insurers in overcoming financial crises

  

Distinguished guests, Many countries in Asia share the painful experience of coping with a series of financial crises.

We struggled to survive during the Asian financial crisis in the late 1990's.

We are still in the shadow of the 2008 global financial crisis and the European fiscal crisis.

Last month, the IMF warned that the financial crisis is at high risk of becoming "chronic".

In its Global Financial Stability Report, the Fund also said:

"what is needed now is a renewed commitment to complete the reform agenda

at the global and national level."

Ladies and gentlemen, One of the core subjects of this reform is to build a constant crisis management system.

Against this backdrop, deposit insurers are given a clear mandate.

Deposit insurers are right at the center of crisis management.

Their role is changing, in both ex-ante and ex-post terms.

At the most basic level, deposit insurance aims to reduce the risk of crisis by calming irrational fears ex-ante, as well as to prevent the risk of contagion ex-post.

The recent global financial crisis proved the effectiveness of the deposit insurance system as a financial safety net.

In today's world, we're exposed to constant risks and threats.

Deposit insurers are required to assume responsibilities beyond a paybox function.

The new responsibility is to resolve the problem financial institutions smoothly.

When the global financial crisis occurred in 2008, many countries faced difficulties

in dealing with troubled financial institutions, due to the lack of an effective resolution scheme.

In 2011, the FSB adopted 'the Key Attributes of Effective Resolution Regimes for Financial Institutions'.

Let me mention just a few of the major points.

Resolution authorities are required to have general resolution powers including replacement of the management and transfer of contracts.

Home and key host authorities of all Global-SIFIs should maintain Crisis Management Groups (CMGs).

Financial firms are required to develop their own 'Recovery and Resolution Plans',

that is, 'living wills'.

Now is the time for each country to earnestly carry out the FSB directives based on its own experience.

Korea, in the wake of the Asian financial crisis, greatly enhanced its deposit insurer (KDIC)'s function as a resolution authority.

Going forward, Korea will keep pace with global trends and make its resolution regime more effective and efficient.

 

 

3. The need for greater international cooperation & the role of the Asia-Pacific region

  

The second part of my talk is:

the need for greater international cooperation and the role of the Asia-Pacific region.

I want to highlight three points.

My first point is :

the importance of global cooperation.

There has been a mega trend toward de-regulation and globalization since the 1980s.

Complex financial instruments and cross-border asset holdings have significantly increased.

Cross-border presence of financial firms has grown as well, leading to the growth of multinational financial institutions.

Global financial markets are closely intertwined, beyond national borders.

Now, crisis contagion knows no geographical limits.

Efforts at the national level are not enough to guard against external shocks.

Therefore, cross-border cooperation is extremely important in supervising the financial markets.

The 2008 global financial crisis heightened the need for cross-border cooperation.

The G20 and FSB have played leading roles in the discussions on global cooperation issues.

The priority here is to strengthen prudential regulation of systemically important financial institutions (SIFIs), and minimize the impact of failures on the markets.

My second point is :

The perspectives of emerging economies should be taken into consideration

with more attention and respect.

Most countries in the Asia-Pacific region are not home countries, but host countries of global SIFIs.

They rely heavily on trade and foreign investment.

These countries remain vulnerable to external shocks.

As you know well, the recent global crises originated in the Western advanced economies.

International dialogues have tended to give more weight to the home country's perspective.

Asia-Pacific countries must raise their voice so that global discussions can reflect the interests of both emerging and advanced countries.

For the past few years of global dialogue on financial regulatory reform, Korea has made genuine efforts

to better represent the voice of emerging economies.

In 2010, when Korea was the host country of the G20 summit, Korea took the initiative to put a new agenda on the G20 table.

It was 'Financial Stability Issues in Emerging and Developing Economies'.

In 2011, the FSB created the 'Emerging Market and Developing Economies Task Force,' which Korea chaired.

The FSB also has established six Regional Consultative Groups, bringing FSB members and non-members together to exchange views on financial stability issues.

At this juncture, leveraging such opportunities, Asia-Pacific countries are called on to act more proactively.

My final point is :

Effective deposit insurance system should be ensured in the Asia-Pacific region.

To do that, building close cooperation among IADI members is essential.

We must double our efforts.

We need to ensure that an effective deposit insurance system takes root and develops in each country.

I hope that the IADI Asia-Pacific Regional Committee will play a crucial role in this regard.

Korea has the invaluable experience of restructuring troubled financial institutions and implementing institutional reforms.

The Korean government and KDIC started taking early steps to actively transfer Korea's experience through various channels like the Knowledge Sharing Program.

And Korea will continue to expand this effort.

 

 

4. Closing remarks

 

 Ladies and gentlemen, There is an English proverb worth considering in times of 'constant crises':

Fool me once, shame on you;

Fool me twice, shame on me.

 

Now, we should go beyond passive responses to financial crises.

 

We must protect honest taxpayers from another financial crisis.

 

Often said, a crisis is an opportunity in disguise.

 

Crises truly have helped Asian countries identify and fix structural problems and build stronger fundamentals.

 

I am confident that the experience will provide vital input for future reform agenda.

 

Lively discussions at this Conference, together with close cooperation between authorities, will contribute greatly to the stability and development of the Asia-Pacific financial markets.

 

Thank you very much for your attention.

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