By Na Jeong-ju
Staff Reporter

The world needs to set up new financial regulatory structures that can steer reform and better manage risks to promote post-crisis economic growth, said Euh Yoon-dae, a financial advisor to President Lee Myung-bak.

The restructuring, however, should focus on stability rather than efficiency, as the global economy is still vulnerable to systemic failures, he said.

Euh made the proposal in a speech at the Asia-Pacific Economic Cooperation CEO Summit in Singapore, Friday, which drew more than 500 business leaders in the region and leaders of international organizations.

"We need regulations and mechanisms, which not only protect financial institutions and deposits, but also safeguard against systemic failures and spillovers to the economy," said Euh, chairman of the Presidential Council on Nation Branding.

Euh, 64, is one of Korea's key financial policymakers, having a strong track record as an international financier. He worked as a member of the Bank of Korea's decision-making monetary policy committee in early 1990s.

The former Korea University president said the recent agreements by G20 finance ministers and central bank governors reflected a shift of focus from crisis response to post-crisis management.

Regarding the change, Euh suggested more development assistance to poor countries to address a global economic gap and the enforcement of climate change financing to promote "green growth."

"Development assistance is not only crucial for poverty reduction, but also for building sustainable growth engines for the global economy," Euh said.

"There is a need for discussing comprehensive aid packages for the poorest countries, including substantially increasing international resources for concessional financing, financial inclusion and new financing mechanisms such as micro-finance."

Korea, as the chair of the G20 Summit in November 2010, will play a bridging role between developed and developing countries to address the problem, he said.

Euh also called on countries to step up efforts to tackle climate change, saying the issue is directly related to the future growth, or even survival, of the global community.

"We need to create an environment that expands the scope of carbon markets in order to attract private financing," Euh said.

Advanced countries claim that their development assistance funds should be considered as part of climate change finance, while developing countries maintain that separate and additional climate change financing is necessary.

Euh pointed out that it is technically difficult to separate the two types of funds, saying Korea intends to triple development assistance by 2015, but also increase the green portion of the funds from the current 14 to 30 percent by 2020.

He also hoped there would be intensified efforts and discussions for strengthening the global regulatory framework as well as cross-border coordination with a greater focus on stability rather than efficiency.

"The free market is the most powerful driving force for growth. But the role of governments should expand to tackle the crisis," Euh said.

"Despite a series of measures in the wake of the economic crisis, there are still many issues to be addressed, including resolution procedures, stronger regulation for shadow banking systems, detecting and limiting systemic risk, restricting leverage and executive compensation."

jj@koreatimes.co.kr