William J McDonough: The foundation of financial stability  Speech by Mr William J McDonough, President and Chief Executive Officer of the Federal Reserve Bank of New York, before the 50th Anniversary Symposium of the Bank of Korea, held in Seoul, on 8 July 2000. *  *  *  It is a true honor to address you today on the occasion of the 50th anniversary of the Bank of Korea. I regret that I am unable to join you personally in your celebration. The past half-century has been one of tremendous challenges and outstanding achievements for Korea, to which even a short list of developments testifies: national rebuilding after the devastations of the Korean War, the economic miracle, democratization and the emergence of a modern, urbanized and well-educated population. Indeed, given initial conditions, Korea might be considered the biggest success story of the last 50 years. This record reflects the long Korean history of resilience in the face of external threat, the hard work and energy of the Korean people, and the adoption of new models in response to environmental change. The Bank of Korea has played a key role in Korea’s economic success. In the early stages of development, the Bank acted to facilitate the state-led growth model. The Bank’s role evolved as the economy became more market-driven over time, and the amended Bank of Korea Act further enhanced the independence of the central bank and enshrined price stability as the primary objective of monetary policy.

As part of the improved disclosure of policies and intentions, timely and comprehensive dissemination of the public sector’s balance sheet and income statement clearly is necessary if market turbulence is to be reduced. Such disclosure helps identify pressures or problems that might otherwise be allowed to fester. For example, more timely, continuous and comprehensive release of data on foreign exchange reserves may encourage earlier and appropriate policy action in the face of large-scale speculative pressures. Transparency is most effective when it is an established element in a clearly articulated, goal-oriented process. Sensitivity to the changing needs of the marketplace for information - both statistical and qualitative - can be developed only through an ongoing dialogue with market participants. Experience suggests that in today’s 24-hour trading environment with instantaneous access to information everywhere, authorities are well-advised to speed up their disclosure and explanation of their actions and intentions. Conclusion In closing, the recovery in Asia, and particularly Korea, is remarkable indeed, and owes much to the energy and hard work of its people, enlightened political leadership, and the substantial and focused efforts of policymakers to implement sound macroeconomic and financial policy. But the recovery is not yet complete and much remains to be done. Moreover, the rapidity and severity of the developments of the last several years, indicative of the transformation of the international financial landscape, underscore the importance to crisis prevention of ongoing vigilance and robust institutional structures, and the awareness that we can never let our guard down.