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Essay / Research Paper Abstract
This paper discusses the Korean economy, as well as intermediation and comparison of economic structures (such as financial institutions) to those in the United States. Also touched on is how the Asian crisis impacted the Korean economy. Bibliography lists 8 sources.
Page Count:
5 pages (~225 words per page)
File: D0_MTkoreai.rtf
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which are composed of commercial and specialized banks (Institute for International Economics, 2002). The second are non-bank institutions, such as development banks, investment banks and savings institutions (Institute for International
Economics, 2002). After privatizing four national banks in the early 1980s, the government authorized establishment of new national commercial banks (Institute for International Economics, 2002). There are currently 15 national
commercial banks and 10 local commercial banks in South Korea, which account for approximately 30 percent of total assets held by financial institutions (Institute for International Economics, 2002). With deregulation,
however, came the explosive growth in the number of savings institutions and a loss in the total market share held by commercial banks (Institute for International Economics, 2002). This, in
a sense, led to Koreas problems during the 1997 Asian crisis. One reason for the collapse of the entire Asian economy involved
weak financial sectors and high levels of corporate debt (Stiglitz, 2002; see also CountryWatch.com, 2002). This included inadequate financial regulation, which permitted banks to make risky loans without proper monitoring
(Stiglitz, 2002). In order to compete globally, Korea eliminated interest rate controls, removed restrictions on corporate debt financing and cross-border flows and allowed intensified competition in financial services (Stiglitz, 2002).
Although these changes offered many advantages, safeguards were not in place (Stiglitz, 2002). In addition, this went against the former policy of extensive capital and interest rate controls, which was
in play during the 1960s and 1970s, and that helped Korea ensure the flow of credit to export-oriented industries (Institute for International Economics, 2002). As far back as 1982, however,
the government worked toward liberalizing the financial sector, as it privatized commercial banking, abolished preferential rates for policy loans by commercial banks and allowed corporate bond yields to fluctuate around
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