SEOUL, May 23 (Reuters) - South Korea needs to step up regulations to prevent another financial crisis and develop foreign exchange markets to deal with sudden capital flows, a senior central bank official said on Sunday.
The country also needs to have a "proper level" of foreign exchange reserves, said Kim Kyung-soo, the head of the Bank of Korea's Institute for Monetary and Economic Research.
"It is necessary to secure a macro prudential policy and strengthen regulations in order to prevent a recurrence of a financial crisis," Kim said in a abstract of a thesis, which he worked on with an International Monetary Fund researcher.
Kim did not provide details on which financial regulations the country needs to toughen.
"The issues should be discussed further in an international body such as G20," he told Reuters by telephone, adding other countries also need to strength regulations.
South Korea is hosting the November summit of the Group of 20 with some of the world's leading economies such as Germany, France and Britain pushing for a global bank tax scheme along with stricter regulations on banks. But some others including Canada oppose the idea.
Last week, Financial Services Commission Chairman Chin Dong-soo said the country would look at extra measures to cushion the impact from a possible sudden shift in cross-border capital flows. [ID:nTOE64H098]
On the foreign exchange reserves, Kim said he did not say what level of foreign exchange reserves was appropriate, adding he did not mean the country must increase or decrease the reserves.
"To supplement vulnerability revealed during a financial crisis, it is necessary to secure (a) proper level of foreign exchange reserves with consideration of possible crisis and effectiveness," he said in the abstract provided by the central bank.
South Korea's foreign exchange reserves in April posted their biggest monthly gain in five months to a record high of $278.87 billion. [ID:nSUL000044]
Kim's remarks came as financial markets globally, including South Korea's, have been hit by the euro zone's debt problems.
At the height of the global financial crunch in late 2008, many foreign bank branches had to send their money back to their cash-starved headquarters, causing a currency squeeze in the local market. (Reporting by Cheon Jong-woo; Editing by Jerry Norton)