seung park : economic and financial developments in east asia introductory remarks by dr seung park, governor of the bank of korea, at the international forum on monetary & financial cooperation for asia, seoul, 20 february 2004. * * * opening remarks ladies and gentlemen, let me first extend a hearty welcome to all participants who have gathered from australia, china, japan and korea to attend the international forum on monetary & financial cooperation for asia. i am very glad to see here today so many great scholars of money and finance. i would especially like to express my deep thanks to prof. choi, woonyoul, president of korea monetary and finance association, and all those involved with arranging this meaningful and timely forum for having invited me to address you today. prof. choi was one of the monetary policy committee members of the bank of korea until the end of last year and contributed greatly to the bank ’ s conduct of monetary policy. taking this opportunity i thank him again for all his services during his terms of office. the finance associations of the four countries taking part in this forum have been engaged in very lively research activities and academic exchanges that have contributed mightily to financial sector development not only of their own countries but of entire western pacific basin region. your forum is also the focus of attention because discussion will center mainly on a matter of common concern throughout east asia, namely on plans to promote regional cooperation for the growth of the financial sector. the position of east asia in the world economy ladies and gentlemen, as you are well aware, east asia has achieved very high rates of economic growth over the last half century, and is now a major pole of the global economy. japan long ago joined the ranks of advanced countries after the post - war reconstruction of economy. korea, for its part, achieved the miracle of han river rising phoenix - like from the ashes of the korean war and utter destitution to become a member of what is often called the rich man ’ s club of the oecd in 1996. since the 1980s, china has also maintained rapid growth averaging around 9 % and paved its way as a great new economic power. as a result, east asia ’ s economic profile has been greatly heightened. japan, china and korea now rank the 2nd, the 6th and the 12th country respectively in terms of the scale of their economies with the combined gdp of three countries representing 18 % of that of the world as a whole. in the course of its dramatic economic spring forward, east asia

at euro area level. regarding the srm, the legal framework for resolution contained in the bank recovery and resolution directive ( brrd ) creates a stronger set of tools for winding down failing banks in the future. by ensuring that bail - in must precede bail - out, the brrd achieves a level playing field and reduces financial fragmentation linked to the strength of national budgets. moreover, in the transition to the brrd, and as of next month, new state aid rules will require the burden - sharing of losses by shareholders and creditors, if resolution actions involve public funds. this will ensure that shareholders and creditors are the first to bear losses, and not the taxpayers. but it is key, particularly for cross - border banks, that there is a strong central authority that can use these tools in a swift and impartial manner. the ecb has been clear that we need a single european resolution authority and a single resolution fund as a fundamental complement to the ssm. i welcome the proposal of the european commission in this respect and will assess it in detail. the plan that the srm comes into force in 2014 and can start its operations as from january 2015, when the brrd enters into force, is also welcomed. banking union is about restoring the single market for capital. european companies should be able to tap a single pool of savings to fund their global expansion. banking union will ensure that the funding cost of a bank depends on the quality of its assets, not on the jurisdiction in which its headquarters are located. there might be fundamental reasons why portuguese smes do not borrow under the same terms as german smes. but they should borrow under the same terms from portuguese and from german banks. the role of market structures however, even if banking union can reduce financial fragmentation across countries, it may not, by itself, be sufficient to reduce it within countries – as epitomised by the significant mark - up on loans paid by smes compared with larger firms. indeed, according to the results of the ecb survey on the access to finance of smes in the euro area, conducted in february - march 2013, 16 % of smes ( that is more than 2 million ) report access to finance as their main problem. furthermore, interest rate spreads on sme loans compared with those for large non - financial companies have widened to an average of 40 basis points since 2010. this links to the third factor in restoring credit provision : improving market structures, in particular to help specific