BOK heads calls for building global financial safety nets

South Korea\'s top central banker on Tuesday stressed the need to build up global financial safety nets to promote financial stability as an absence of such scheme would deepen global imbalances. Bank of Korea (BOK) Gov. Kim Choong-soo said in a forum hosted by Economic Club of New York that the global financial system \"needs an effective backstop for global liquidity shortage,\" expressing hopes that advanced economies should be more active in creating global financial safety nets. \"Without effective global safety nets, emerging market economies will have even greater incentive to pile up foreign reserves for self-insurance, which may also be prone to moral hazard,\" the governor said. \"Self-insurance will also contribute to global imbalances rather than global rebalancing. I do hope advanced economies give more consideration to the global financial safety nets for the benefit of us all.\" The establishment of a global financial safety net has been widely viewed as a preventive measure for a financial meltdown like the one sparked by the collapse of the Lehman Brothers in 2008. But central banks in major economies and international financial institutions are seen as taking a passive approach toward creating such systems, claiming that global safety nets could nurture moral hazard or complacency among emerging countries. Governor Kim also said that there are \"broadly symmetric two-way growth spillovers\" between advanced economies and emerging markets, citing a study undertaken by the BOK. A 1 percent increase in GDP in either group of economies stimulates economic growth of the other group by 0.3 to 0.4 percentage point in the intermediate run, according to the governor. He said that structural reforms, trade and financial openness, as well as fiscal prudence, are seen as having growth-enhancing effects in the long term.