Hyun Song Shin Named BOK Governor Nominee Amid Global Uncertainty

Hyun Song Shin, head of the Bank for International Settlements' Monetary and Economic Department, has been nominated as the next governor of the Bank of Korea, prompting internal reactions that "the best expert for managing crisis situations has been selected."

The nomination comes as global uncertainty rises amid the U.S.-Iran conflict, with the won-dollar exchange rate and stock markets showing roller-coaster volatility—circumstances requiring someone capable of managing macroeconomic and financial stability.

BOK Governor Rhee Chang-yong has reportedly said on multiple occasions recently that "if Director Shin takes over as the next governor, we can rest assured."

Lee Gyu-yeon, senior presidential secretary for public communication, said at a briefing on the 22nd: "Nominee Shin is a world-renowned authority on international finance and macroeconomics who possesses both academic depth and practical insight, having worked not only as a Princeton University professor but also at the IMF and the Federal Reserve Bank of New York." Lee added that Shin is "the right person to simultaneously achieve the monetary policy goals of price stability and national economic growth during a period of heightened international economic uncertainty."

Shin is regarded as someone with extensive experience in both academia and policy in the fields of global macroeconomics and financial system stability. Economic ministry officials who worked with him note that he played a key role in overcoming the financial crisis while serving as international economic advisor to President Lee Myung-bak's Blue House. During that period, he introduced the so-called "macroprudential three-piece set": forward exchange position regulations, foreign exchange prudential levies, and taxation on foreign bond investment.

Shortly after his nomination, Shin said: "It is an incomparable honor, but I feel a heavy responsibility leading monetary policy during such a grave time. I will carefully consider how to implement balanced monetary policy that takes into account prices, growth, and financial stability."

Market attention is now focused on the direction of monetary policy after Shin takes office. While the textbook central bank response to rising inflation fears amid surging global oil prices would be to raise interest rates to combat inflation, a premature rate hike could sharply contract the economy and burden the domestic economy overall.

Shin appears to fundamentally believe that inflation must be contained. At the "G20 Global Financial Stability Conference" hosted by the Ministry of Economy and Finance in September 2022, he told the BOK to preemptively raise the benchmark rate, saying "containing inflation is the top priority for current economic policy." At that time, Russia had invaded Ukraine, heightening global tensions and triggering inflationary shocks. Given the similarities to the current situation, this suggests a higher likelihood of rate increases in a tightening direction.

However, Shin has recently voiced more cautious views. According to Reuters and other foreign media, he emphasized regarding high oil prices and resulting inflation concerns: "If the shock comes from the supply side and is temporary, rather than responding mechanically with interest rates, we should look through the situation." This suggests the Iran conflict may also require patience, or more time may be needed to determine whether it's time to prepare for renewed tightening. The fact that major inflation indicators have not yet fully reflected rising oil prices is also behind his assessment of the situation as "very confusing." Inside the BOK, the prevailing view is that he will lean toward caution rather than rate hikes.

On exchange rate policy, Shin is expected to employ the precision tool of macroprudential measures rather than the blunt instrument of interest rates. He has consistently warned about the dangers of the "financial channel" through which high exchange rates erode corporate balance sheets. Observers expect that after taking office, rather than defending the exchange rate through rate hikes, he will activate an independent foreign exchange defense roadmap that directly controls capital flow volatility through strengthened macroprudential policies.

BOK governors are appointed after presidential nomination and National Assembly confirmation hearings. The process typically takes about one month from nomination to inauguration. Past cases show inaugurations occurring within approximately 30 days of nomination.

Shin boasts extensive global connections based on his experience at overseas universities and international financial institutions. Since 2014, he has served as economic adviser and head of research at the BIS—often called the "central bank of central banks"—and is known to have relationships with central bank governors from major countries who regularly attend BIS meetings.

He is also reported to have close ties with Tobias Adrian, current director of the IMF's Monetary and Capital Markets Department, who oversees the IMF's capital markets, macroprudential policy, digital currency, and financial regulation. A global financial research network centered on Shin is densely established across major international organizations including the BIS and IMF. This spider-web-like global network is seen as an asset that could significantly enhance the BOK's international coordination capabilities and risk management going forward.

Shin is known to hold negative views on cryptocurrencies including stablecoins—digital currencies designed to maintain value pegged to fiat currencies like the U.S. dollar on a "1 coin = 1 dollar" basis.

At major conferences and in his writings, Shin has emphasized the principle of monetary singularity, stating: "Stablecoins find it difficult to maintain one-to-one value with fiat currency during crises." He maintains that stablecoins issued by private cryptocurrency operators could threaten financial stability. He has also expressed the view that won-based stablecoins could be a shortcut to neutralizing existing foreign exchange transaction regulations. In last year's BIS annual report, he warned: "Stablecoins do not fulfill the role of stable currency and, being unregulated, could pose risks to financial stability and monetary sovereignty."

Industry observers expect Shin to accelerate the introduction of a central bank digital currency issued by the BOK while implementing strong regulatory guidelines for private virtual assets.