Seoul seeks tougher rules

South Korea needs to step up regulations to prevent another financial crisis and develop foreign exchange markets to deal with sudden capital flows, a senior central bank official said yesterday.

The country also needs to have a "proper level" of foreign exchange reserves, said Kim Kyung-soo, Head of the Bank of Korea's Institute for Monetary and Economic Research. "It is necessary to secure a macro prudential policy and strengthen regulations in order to prevent a recurrence of a financial crisis," Kim said in an abstract of a thesis, which he worked on with an International Monetary Fund researcher.

Kim did not provide details on which financial regulations the country needs to toughen. "The issues should be discussed further in an international body such as G20," he said by telephone, adding other countries also need to strength regulations.

South Korea is hosting the November summit of the Group of 20 with some of the world's leading economies such as Germany, France and Britain pushing for a global bank tax scheme along with stricter regulations on banks. But some others, including Canada, oppose the idea.

On the foreign exchange reserves, Kim said he did not say what level of foreign exchange reserves was appropriate, adding he did not mean the country must increase or decrease the reserves.

"To supplement vulnerability revealed during a financial crisis, it is necessary to secure (a) proper level of foreign exchange reserves with consideration of possible crisis and effectiveness," he said in the abstract provided by the bank.