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Financial liberalization and regulatory changes in Korea

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Frame of Image ons (NBFI), which were owned by chaebols and essentially used as their financing arms after the government siphoned off policy loans. Indeed, empirical analysis shows that total debt increased for chaebols which owned a NBFI while the profitability and balance sheets of chaebol-owned NBFI’s deteriorated much more than those not owned by a chaebol. The analysis suggests that the expansion and unchecked lending of NBFIs to chaebols was a major cause of the financial crisis in Korea. But the ownership of NBFIs by chaebols explains how chaebols were able to over leverage themselves; but it does not explain why NBFIs were able to expand so quickly and were able to lend unchecked. The explanation may lie not in one but a series of factors that converged to facilitate their unabated expansion, namely haphazard deregulation, inadequate prudential supervision, and a change in policy direction that created a favorable environment for NBFIs. In the wake of the crisis, Korea’s corporate and financial sectors underwent massive reforms. Within the financial sector, the financial supervision system was specifically targeted for overhaul. Indeed, the system of supervision was consolidated and reorganized, and regulators were equipped with better tools for prudential supervision. Liberalization and opening of its financial market have left Korea seemingly more vulnerable to external shocks. At the same time, Korea has also experienced a higher frequency of home-grown financial crises albeit a


Full Text
Title Financial liberalization and regulatory changes in Korea
Similar Titles
Material Type Reports
Author(English)

Kim, Joon-Kyung; Park, Yung Chul

Publisher

[Seoul]:KDI School; Korea University

Date 2011-10
Event

KDI 개원 40주년 기념 국제회의: 민주화와 세계화 시대 한국경제의 성과와 과제

Pages 44
Language English
File Type Documents
Original Format pdf
Subject Economy < Financial Policy
Holding KDI; KDI School of Public Policy and Management