S. Korea may tighten macro-prudential measures if needed: BOK head

South Korea's top central banker said Monday that the country may strengthen measures to smooth out cross-border capital movements if needed, but potential steps would not take on features of capital control.

South Korea has undergone excessive capital outflows whenever a financial crisis has cropped up. Since 2010, Korea has implemented a set of the so-called macro-prudential measures to ease volatile cross-border capital flows including bank levies and tighter regulations on banks' FX derivatives positions.

Market players' interests lie on whether authorities might tighten such rules after the Bank of Korea and the financial watchdog are probing into local banks' handling of FX derivatives positions amid the local currency's ascent.

"We may strengthen the macro-prudential policies if needed, but there would be no intervention policies or capital control policies," BOK Gov. Kim Choong-soo told a press conference.

The governor said that the major difference between macro-prudential measures and capital control policies is whether to discriminate between residents and non-residents.

He said that the foreign exchange rates "are determined by market fundamentals" and Korea is doing "smoothing operations" in the FX market when volatility is excessively large, dismissing the view that Korean FX authorities are intervening in the market.

The probe came as quantitative easing by major central banks may have negative spillover effects on emerging countries, raising risks of asset bubbles and strengthening currencies of emerging countries.

Central banks in the U.S., the eurozone and Japan have pledged to pump money into the global financial system by buying bonds to prop up the fragile economy.

Gov. Kim's remarks came after he and Zeti Akhtar Aziz, the governor of Malaysia's central bank, co-hosted the meeting of Asia's consultative group for the Financial Stability Board.

Monday's meeting marked the third of its kind since financial regulators from 16 Asian countries held an inaugural meeting of the region's consultative group for the FSB in Seoul in November last year. The second meeting was held in Kuala Lumpur in May. (Yonhap News)