FSS tries to smooth over chief’s blunder

Contrasting remarks by two top financial authorities stir controversy


The Financial Supervisory Service began making excuses for remarks by its chief last week that revealed an economic outlook contrary to that of another financial authority and hinted at discord between the two.

FSS Gov. Kwon Hyouk-se said in a radio interview Thursday that the world economy would not head toward a situation as bad as the global financial crisis in 2008.

“Unlike in 2008, the global economy is in a recovery phase, albeit at a slow speed as uncertainties stemming from the European fiscal crisis have increased,” the head of the nation’s top financial regulator said. 

“So (the world economy) in general will not enter a situation as serious as that.”

Kwon’s comments contrasted with the words of Kim Seok-dong, chairman of the Financial Services Commission which makes top decisions for the FSS.

Kim, who works a floor above Kwon in the same building, told his senior staff earlier last week that the European crisis “will shock the global economy beyond expectations,” and be “recorded for having the largest economic impact after the Great Depression.”

In response to news articles and editorials that criticized the two leaders for sending conflicting signals to the market, the FSS said it would be improper to describe Kwon’s economic outlook as optimistic.

The FSS explained in an email to reporters Saturday that Kwon meant to say that while it is necessary to prepare for a prolonged global economic slowdown, scare-mongering or overreaction should be avoided.

Kwon was merely making general comments citing statistics and projections by market experts, the regulator said in a six-page document that contained the transcript of his interview and economic outlooks by the Organization for Economic Cooperation and Development and the International Monetary Fund.

“It seems to be the overall opinion that the possibility of extreme scenarios such as Greece’s withdrawal from the eurozone or Spain’s bankruptcy for now is low,” the FSS quoted Kwon as saying.

About Kim’s earlier diagnosis, Kwon said he understood it as an emphasis on the need to brace for a lengthened slowdown of the world economy.

Other high-profile financial figures added to the mixed views over the past week.

KDB Financial Group chairman and former Finance Minister Kang Man-soo backed up Kim’s bleak observation by saying that the current economic crisis could be worse than the Great Depression of the 1930s and would last longer.

Wary of growing jitters, Finance Minister Bahk Jae-wan said Thursday that Korea would be able to absorb the external shock as its crisis-handling ability has greatly improved since 2008.

Kim Choong-soo, governor of the Bank of Korea, said Friday that it was unlikely to see anything unexpected in Greece, and that Korea was more affected by economic changes in the U.S., China and Brazil than the eurozone.

By Kim So-hyun (sophie@heraldcorp.com)