Governor of the Bank of Korea: “Unity of currency is important… Promoting internationalization of the Bank of Korea Financial Network”

G30 International Banking Seminar… “Central banks need to resolve the deadlock in cross-border payments.”

Traditional stabilization measures are emphasized in response to concerns about financial stability due to the spread of AI.

(Seoul = Yonhap News) Reporter Lee Do-heun = Bank of Korea Governor Shin Hyun-song introduced the Bank of Korea's internationalization plan to improve the cross-border payment system and emphasized the importance of currency unity.

Governor Shin spoke as a panelist at the G30 International Banking Seminar held in Bangkok, Thailand on the 17th (local time) in conjunction with the G20/IMF Annual General Meeting.

Governor Shin said that after the 1997 Asian financial crisis, many countries, including Korea, hesitated to liberalize payment systems and financial markets, but now is the time, and that the Bank of Korea is testing the international version of the Bank of Korea Network (BOK-Wire), the Bank of Korea's large-value payment system.

It is a plan to allow cross-border Korean won payments without having to have an account in a domestic bank, and is aiming for formal operation in January of next year.

Governor Shin emphasized the unity of currency, saying, “All payments are made in central bank currency.” He went on to say that establishing such a system is an important role for the central bank to resolve the deadlock in cross-border payments.

Governor Shin said, “Unity of currency is absolutely key,” and repeatedly emphasized the importance of ensuring accuracy through unity of currency, especially in the field of wholesale finance.

He also pointed out that the market shock could be amplified as the behavior of financial institutions becomes similar in relation to financial stability risks resulting from the spread of artificial intelligence (AI).

Governor Shin compared AI to a “very clever black box” and said that it is characterized by very low transparency.

He went on to say, “Lack of transparency is a problem we are already familiar with through the series of financial crises we have experienced,” and added, “We have built traditional tools such as capital, leverage restrictions, and collateral to respond to this.”

He explained the AI ​​response of market participants, citing the Millennium Bridge incident as an example.

The idea is that just as pedestrians adjust their posture to maintain balance when a bridge shakes and the reaction increases the shaking of the bridge again, individual responses by financial institutions can increase the impact of the entire market.

Governor Shin emphasized the importance of traditional financial stability tools, saying, “Lowering leverage, increasing capital, and strengthening safeguards will enable greater diversity.”