Shift in Financial Paradigm and FSC’s Responses (1)

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Changes in Global Finance: Why, What and How?

A quick question to all of you! What’s the latest change in your life? There will be lots of answers, ranging from tiny things such as changing your hair color to somewhat significant events as like wedding, funeral, and giving birth.

Right, whether we are aware of them or not, countless things are changing on a daily basis. Sometimes, we are so surprised that a huge change has been undergoing for a pretty long time, while having been not very much conscious of it.

Similarly, ‘financial paradigm’ has undergone changes over the last few decades. We call it, ‘Shift in Financial Paradigm’, which has already been talked several times in this blog. I would like to talk some more about it, as it is what financial policies should be following. Of course, FSC’s policy stance is in line with this paradigm.

 

Then, WHY is there a shift in financial paradigm? Even though this shift has not proceeded in the blink of an eye, the recent trends in global economy significantly urged the shift. Namely the 2008 global financial crisis and EU financial crisis were the remarkable events requesting the changes in global economy and finance. Influenced by those crises, people became more aware of the instability in global system, looking for changes as well as examining the past.

WHAT are the movements in pursuit of the financial paradigm shift? One is the balance between market and government, while the other is economic stability and fairness. In other words, ‘new concept of capitalism’ is desired.

Reflecting theses ideas, there have been actions carried out in financial sector. For example, G20 and Financial Stability Board (FSB) meetings were seeking the global measures. Those are seeking ‘market regulation, economic stability, and corporate social responsibility (CSR)’ all based upon a sound market autonomy.

FSC is keeping up with this recent trend, aligning its policy measures with those values above mentioned. Mr. Kim Seok-Dong, the Chairman of FSC, emphasized it once again at the workshop held by FSC in cooperation with the Korea Institue of Capital Markets last week.

First, FSC highly appreciates ‘stability in financial market and soundness in financial industry’. For this ends, FSC introduced ‘Comprehensive Measures on Soft-Landing of Household Debts’ and ‘Frequent Work-out Program’. Those are building up a strong financial capability against external effects in global economy.

Second, FSC is working towards enhancing financial ‘services’ sector in Korean financial sector, for the purpose of creating high-end industry. Policy measures are being designed and introduced to prepare for the infrastructure of more advanced financial services sector. Particular examples are; measures to facilitate hedge fund market, amendment to Capital Markets Act, and financial support to newly growing industries.

Lastly, FSC highly values a ‘social responsibility’ of financial sector. This concept of financial responsibility has been rising, as financial consumers are widely recognized as the important participant in the market. This is different from the previous era when financial suppliers and stakeholders were at the heart of the market. Now, financial sector tries to focus on ‘customers’ rather than ‘producers’ of financial products.

The last point regarding ‘financial consumer’ is actually the very key to understating a new financial paradigm. It is not too much to say that the shift in financial paradigm is about protecting financial consumers in the market. I would like to talk about it in more details, so please keep your eye on my next post 😀

Regards,
Frank

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