Some of the areas where moral suasion has been used are the need for banks to monitor unhedged foreign currency exposures of their corporate clients, adoption of appropriate incentive mechanisms by banks for encouraging disclosures of derivative exposures by their corporate clients, banks’ reliance on non-deposit resources to finance assets, their excessive reliance on wholesale deposits and uncomfortable loan-to-value (LTV) ratios in respect of housing loans etc.
Therefore, the emphasis of future monetary policy is being placed on preventing further contraction of the real economy and on promoting structural adjustment. First, the Bank of Korea will maintain a policy stance favoring the stability of interest rates in order to encourage the recovery of the real sector, insofar as this does not conflict with sustaining foreign exchange market stability.