The Korean banking industry is seeking to be "global". The globalization, or internationalization, of the Korean banking industry is one of the crucial strategic options needed in order to sustain growth and diversify earnings in response to market pressures. First, excessive asset growth in recent years driven by mortgages and SME loans in the domestic market will be more or less limited in the future unless there are significant improvements in the macroecnomic environment in Korea. Second, undiminished competition may further squeeze interest margins and fee incomes. Third, new expansion in Asian economies, including China, South Asia and even central Asia, will provide some fresh opportunities for external growth. Especially, M&As of banking services on a global scale will facilitate such movement of Korean banks.
In this regard, Korean banks need to pursue preemptive actions in preparation for overseas expansions in several ways. Above all, Korean banks require stabilized domestic operations in terms of profitability, capital cushions, and asset soundness. That is to say, Korean banks should keep asset quality more sound than ever, which may unexpectedly weaken if macroeconomic and global financial markets remain volatile and vulnerable. Also, it is crucial to maintain comparable strengths in capital bases such as BASEL requirements and Tier Ⅰ ratios. Finally, Korean banks must adapt and transform their internal management systems into global operating ones, since the process of globalization will increase the need for global expertise, risk controls, and strategic outsourcing.
Also the logit estimations using 18 countries' data for 13 years between 1993 and 2005 confirm that the leading global banks consider various factors such as macroeconomic conditions, banking industry structure, and business competitiveness when selecting target markets overseas. In selecting target markets, banks consider the profitability and macro -economic growth potentials. It is found that a stable market structure in the target market facilitates globalization of the banking industry. In 2000s the acquisition incentives in the Asian market, where there have been quite strong activities, are found to be related with profitability and dividend ratios.
Finally, the market conditions in the Korean banking industry and empirical results in the global banking industry imply that both the macro and micro environment may reduce strategic risks from the globalization of Korean banks, and that Korean banks should consider more active approaches in diversifying regional bases by considering macroeconomic linkages, high-growth countries, and adjacent markets as well. From the policy perspective, the government may help accelerate the globalization of the Korean banking industry through setting globalization policy initiatives or by allowing public funds to participate in overseas joint ventures or acquisitions with Korean banks.
국내은행의 성장성과 국제화 방향(Sustainable growth and global expansion of Korean banks)
서울 : 한국금융연구원
|Series Title; No||금융조사보고서 / 2008-03|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||한국금융연구원; KDI 국제정책대학원|