mr. chon reports on recent economic trends in korea and the bank of korea ’ s monetary policy response to them speech by the governor of the bank of korea, mr. chol - hwan chon, at a press conference hosted by the seoul foreign correspondents club in seoul on 4 / 11 / 98. i - introduction … i am very pleased to be with you today to talk about the recent economic developments in korea. nowadays almost all countries around the world have become closely linked to each other in a global information community, owing to the rapid advances in telecommunications. the advisory role and influence that the international press exercises over the economic development of any one country have correspondingly increased. you yourselves as foreign correspondents in korea have shown keen interest and provided valuable advice, admonition and encouragement in our attempts to defuse the crisis that broke out a year ago. we are most grateful. so, let me take this opportunity to voice my sincere thanks to you all. and i hope that today ’ s meeting, although all too brief, will help you gain a clearer understanding of the korean economy today and the thrust of monetary policy in the future. ii - recent economic trends in korea real economy first, let us look at the recent performance of the korean economy. as you know, we have been going through serious hardships. domestic demand in terms of both consumption and investment has been deeply depressed by the shock of the currency crisis and the effects of structural adjustment. exports have also been sluggish mainly because of the severely subdued demand in our major markets, including japan and southeast asian countries. gdp growth for the first half of this year was down sharply to - 5. 3 per cent as against the 4. 9 per cent of the latter half of the previous year. viewed by quarter, the second quarter ’ s growth rate slid further to - 6. 6 per cent from - 3. 9 per cent in the first quarter. gdp statistics for the third quarter have not been compiled yet, but indicators related to production, consumption and investment remained subdued. unemployment rose to 7. 3 per cent in this september from 3. 1 per cent at the end of last year, as the economic recession deepened and firms downsized in the process of restructuring. and the number of unemployed shot up dramatically to 1. 6 million in september, which was more than three times as many as the half million a year before. consumer prices had risen steeply in the period from last december to this february,

the euro area. as the ssm changed the way supervision addresses problems and communicates what it expects to be done by banks, it also changed the timing and the way banks, their management and their owners acknowledge shortcomings and find solutions. one important step led to a common methodology for the supervisory review and evaluation process, the core of supervisory activities and the basis for the capital level the ssm expects a bank to hold according to its individual risk profile. starting with 19 different supervisory practices and information levels, it was pivotal to set a basis of quantitative as well as qualitative information about individual banks and the differences in national banking systems. we can now reap the fruit from bis central bankers ’ speeches having a single european supervisor by moving our capacity for benchmarking to a european level. but it was not only a busy year, it was a very special year, too. everything we decided, we decided for first time. everything we did set a precedent. thus, everything had to be discussed in the supervisory board of the ssm, consisting of the representatives of the 26 national supervisory authorities as well as of 6 ecb representatives. we formulated supervisory policies in all major areas, for example large exposure limits, the fitness and properness of board members, conditions for changes in qualifying holdings, prerequisites for capital reductions and issuances, model approvals, capital and liquidity waivers, ips etc. we also discussed and agreed on concepts and processes for supervisory planning, onsite inspections, risk analysis, reporting of banks. integrating 19 national supervisory cultures and traditions with a wide range of administrative practices demanded and still demands organisational and methodological rigour. this rigour is sometimes misinterpreted as being not proportional or not in line with qualitative supervision. but common concepts and methods have helped and are helping us to put in place the fundamental pillars of a truly european supervisory approach. some stakeholders had grown fond of some habits and customs. those customs had to be abandoned to make room for a new common approach, as the objective of the ssm is not to preserve 19 national approaches but to foster convergence towards best standards of supervision. it is not my intention to only look back at our past achievements. we cannot lean back and hope for easy wins in the years to come. there are still a lot of challenges ahead of us, which we have to face and address. firstly, there are issues for which we still lack a common approach. for