How to Cultivate 21St Century Central Bankers?

BOKInternational HRD Seminar

“How to Cultivate 21st Century Central Bankers?”

The Bank of Korea,Seoul, Korea

1-2 November 2013

Opening Remarks

Choongsoo Kim

Governor of the Bank of Korea

Good morning, esteemed speakers and distinguished guests.

It is an honour to me to welcome you all to this International Human Resource Development Seminar, celebrating the opening of our new education and training facility for the Bank of Korea. I would first like to express my sincere gratitude to the keynote and session speakers, and to all participants who have travelled from near and far to gather here today.

Ladies and gentlemen,

The competitiveness of any institution depends upon the quality of its human capital. The central bank is no exception, and that is why we are here today, to think hard on the topic of “cultivating 21st century central bankers”.

I would like to talk now about why and how we at the Bank of Korea decided to build up our human capital, during the turbulence of the global financial crisis. And then, I will discuss why I believe central bankers can and must work together on the issue of human resource development (HRD).

The global financial crisis and the central bank

Prior to the 2007-8 global financial crisis, most central banks around the globe had seemed to be enjoying a golden era, often described as “the Great Moderation" ― characterized by remarkable declines in the variability of both output and inflation, for decades. However, the global financial crisis has now changed our global financial landscape forever.

Looking back, central banks had been complaisant during the Great Moderation, focusing only on price stability and therefore failing to notice the bigger threat of macroeconomic risks that were building up. During these good times the visions of central banks were quite myopic, as they were only concerned with their own national monetary policies and national economies. But even so we should have remembered the late Professor Kindleberger’s warning – the seeds of financial crisis are growing in good times.

When I was appointed Bank of Korea Governor in April 2010, the global financial upheaval was still unfolding. And my first important responsibility was to prepare the agenda for the G-20 Summit, in November 2010, in cooperation with the Korean government. At that time the home-grown American sub-prime mortgage debacle had spilled over to the Euro zone, and the global economy was at great risk. As the G-20 chairs, the Korean government and the Bank of Korea had to work hard to mediate the conflicting interests of advanced and emerging economies. New ideas and bold frameworks to tackle global problems were needed, more than ever before. And at that time we proposed some ideas, for example a global financial safety net and a levy on non-core bank liabilities, and some of them were accepted as policy options by member countries. But my experience at the G-20 summit convinced me that central banks, including the Bank of Korea, were really not prepared to handle the big new problems stemming from the global financial crisis.

For that reason I decided to overhaul the education system of the Bank of Korea ― to bring it to a whole new level. It is no exaggeration to say that, over the past few years, the top priority in Bank of Korea management has been placed on human resource development. This is because, to contribute to national economic development, the BOK must be highly proficient, and we have believed that the nurturing of capable human resources is a precondition for this. We have believed in addition that, if we are to maintain our independence as a central bank, which we have valued very highly, then our organization must surpass others in its capacity. And the global competitiveness of the BOK should not lag behind either those of other domestic organizations, nor of other central banks or international financial institutions. Now, at top-level organizations around the world there are about10% of their employees participating in various kinds of education or training programs at any one time. And although it is not possible to achieve 10% immediately here, we have tried to create environment in which at least 5% of our staff are at any one time receiving education or training.

Our belief in the importance of human resource development has been even more firmly strengthened in the process of overcoming this unprecedented economic recession, as we have faced a situation in which the central bank’s role has expanded greatly compared to the past. Economics and economists have been severely criticized for failing to predict the coming of the Great Recession, the worst financial crisis since the Great Depression of the 1930s. Criticism has also appeared asking whether this has been an economic crisis or a crisis in economics. And the central bank cannot be excluded from this criticism, but must humbly accept it. Nevertheless, to overcome this situation we have been unable to avoid depending upon the central bank’s function as lender of last resort, and in line with this the central bank has been actively involved in the financial system reform efforts to remedy the problems that caused this crisis.

As international discussions on financial regulation and supervision have preceded, the opportune revision of the Bank of Korea Act to add financial stability to its mandate, the Bank of Korea has been able to engage effectively in global cooperation. To devise measures for overcoming the financial turmoil internationally, there have been much analysis and research about the real economy and the financial markets. And in this process, the opinion has appeared that the central bank has become even more academic than academia. Our existing economics textbooks need to be substantially revised, and it is becoming certain that a considerable part of this revision will focus on the issue of a new description related to the expanding role of the central bank.

The Bank of Korea’s efforts to develop its human resources began with the reform of its system of human resource development. We introduced the CDP (Career Development Path) system, to enable Bank staff to choose their own career paths to becoming professional experts, and have offered them opportunities for various education and training programs to ensure that they can cultivate the corresponding skills. The former training center of the Bank has been reorganized and its role expanded, to create the current Bank of Korea Academy. The reason why we have chosen the term “academy” for this institute is that it has the character of a true academy, worthy of the name, as a place for the exchange of very high levels of knowledge and the learning of strict discipline and ethics for central bank employees. Above all, for global capacity building we have dispatched BOK staff to work abroad, not only at international financial organizations but also at other central banks. They are working with their foreign colleagues there as team members, and as important parts of these organizations.

To provide our staff with more opportunities for high level education and training, we have introduced a very intensive, one- to two-week Global Initiative Program (GIP). Our staff not only attends courses in the GIP taught by world renowned scholars, but also participate actively in cooperation with central bankers from abroad who attend the program as well. And of course, in addition to this academic program, we also provide practical training programs for employees working in many other different areas. Education programs in accordance with staff members’ CDP paths, levels and needs have been greatly expanded, and workshops among staff at the department level and seminars conducted by invited outside experts are being frequently held.

And as a result of all these efforts, I am proud to say that there has been much change at the Bank of Korea over the past several years. We are seeing visible positive outcomes, for example notable improvements in our research abilities and the spreading of a global mind-set throughout our organization. In 2010, for instance, there was only one collaborative research project that we were engaged in with external institutions like the IMF, but this number has increased to 64 at present. In addition, we are now newly publishing more than 30 high-level research study results each year, in the forms of IPs (Issue papers) and DPs (discussion papers).

Our employees have moreover become much more active in international cooperation. The participation in international meetings by BOK staff at the Director General level, which totalled 50 in 2010, has now increased to 100 so far this year. And the number of international meetings that we hosted was meanwhile 12 in 2010, but has increased to 36 this year. This means that capacity building at our bank is taking place at a high speed, through the accumulation of human capital, and if this trend continues I am confident that the Bank of Korea’s active role in the global economy will continue to grow in the future.

Need for Collaboration among Central Banks in HRD

The global economy will still have to struggle for a considerable time to overcome the global financial crisis. It is not realistic to expect the inter-linkages between the real and financial economies to stabilize in a short period. Strengthening of the central bank’s role and the extended implementation of unconventional policy measures in advanced economies make the formation of economic agents’ expectations more complex, which means that the current state of uncertainty will prevail for a considerable time going forward.

Against this backdrop, the departments of HRD and of education and training at central banks are facing unprecedented challenges. Firstly, how can central bank educators work together to produce “globally optimal solutions” rather than just “locally optimal solutions”? Secondly, how do wecultivate central bankers equipped with the right tools and knowledge for weathering this global crisis? Thirdly, how can we keep our training and education ahead of the curve institutionally? And so on.

First, I believe central bank educators need to collaborate to devise the next generation education system for central banks. Since each central bank is a unique institution, with no peer in its home country, we therefore need each other to strengthen our competitiveness in central banking. In this vein, our central bank educational bodies need to share their specialized expertise and unique experiences, and work together to devise the backbone of the future core curriculum for central bankers.

Second, I would like to say that I think the educational bodies of our central banks need to be more academically-oriented, so as to be able to deal with both conventional and unconventional economic phenomena. The global financial crisis has rendered many of our traditional economic theories and research approaches obsolete. The new theories and frameworks that are appearing should be welcomed, and should be incorporated into our curriculums.

Third, central bank educators need to be innovators, facilitators and game changers in their education and training systems. If we truly wish to be good educators, we need to be good students first; to learn to renew ourselves constantly in order to keep ahead of the curve. And only then will we be prepared to answer the ultimate question that is of course before us: how do we, the HRD departments, make our central banks into true learning organizations?

There is a saying that “If you want a harvest in a year, grow crops; if you want a harvest in a decade, grow fruit trees; and if you want a harvest for a lifetime, grow men.” All of you here should be proud of yourselves, because you are the growers and the gardeners of human capital and talent.

Given all that I have said until now, I am convinced that our International Human Resource Development Seminar here this week is very timely and meaningful. And I sincerely hope in conclusion that it will provide us all with new and fresh ideas and action plans for cultivating our next generation of central bankers.

I hope that your stays in Korea will be memorable and enjoyable, and thank you all very much for your attention.

Choongsoo Kim

Governor

Bank of Korea

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