South Korean banks should take the initiative in boosting the slumping local economy as political uncertainties have been lifted with the presidential election now wrapped up, the central bank chief said Friday.

   "Lenders need to step up efforts to bring the economy back on track," Bank of Korea (BOK) Gov. Kim Choong-soo told a meeting with heads of major banks. "Four major world powers tied to the Korean Peninsula, including Japan and China, are at a new phase in their leadership."

   His remarks came amid anticipation that the new government in South Korea will likely implement pledges from so-called "economic democratization," aimed at easing the lopsided power of conglomerates and the wealthy and giving more benefits to the socially vulnerable.

   The South Korean economy has been suffering from a downturn and forecast to expand in the 3-percent range next year. It grew at the slowest pace in more than three years of 1.5 percent on-year in the third quarter.

   On the issue of a strengthening Japanese currency despite its central bank's further monetary easing, Kim noted that demand for safer assets have increased because investors believe that it will be difficult to reach an agreement on spending cuts in the U.S.

   "Japan's case clearly showed that the policy from one country may not be effective in the global economy (since the financial market is all interrelated)," he said.

   Meanwhile, the BOK chief stressed that banks need to fix their shortcomings to proceed with a future-focused perspective from next year, when the new Basel III, a stiffer set of capital requirements for financial institutions, is set to take effect.

   The top regulator Financial Services Commission (FSC) said earlier that South Korea is "ready" to take in the new capital buffer rules from 2013, as it has planned.

   However, it mentioned the exact time of implementation will be decided in accordance with the schedule from other countries. The FSC said it is keeping tabs on the United States, since it announced last month it won't be adapting the rules from next year due to economic circumstances.

   According to the FSC, 16 out of a total of 27 member countries associated with the Basel Committee for Banking Supervision have yet to draw up the final version of their own Basel III regulations. (Yonhap News)