Recent variations in the financial market environment seem to be enlarging financial industry risk, in turn changing the function of banks. In the aftermath of the currency crisis in Korea, extensive financial reforms have been pursued. In this period, financial institutions have performed various measures to lower their own risks. Large banks, which mainly lent to the corporate sector before the currency crisis, altered their behavior due to the deterioration of profitability and soundness, which resulted in an increase in household lending. Also, financial institutions have showed considerably different loan behavior after 2005 as the economic boom was lowering the systemic risks of the financial industry.
Even in advanced financial markets, the development of direct financing and a shadow banking system before the recent financial crisis has raised questions about the real role of banks. However, the recent global crisis has given rise to controversy on the role of direct financing and shadow banking system. Also, the importance of banks' intermediary function has been brought out once again.
This report discusses the role of banks related to variation in financial industry risk, particularly risks within the banking industry. Also, this report investigates how the variation in banking industry risk theoretically affects the loan behavior of banks, and also looks empirically at how Korean banks performed their roles under past economic conditions. The results of this paper show that domestic banks in Korea have reasonably executed their traditional roles, such as intermediation and liquidity providing functions. Also, this report empirically shows that, since the currency crisis, the loan behavior of Korean banks has changed considerably, moving away from a focus on corporation loans and toward household loans.
은행업 위험변화가 자금중개기능에 미치는 영향(Effects on bank's intermediary function from variation in banking industry risk)
|Series Title; No||KIF 연구보고서 / 2010-02|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||한국금융연구원; KDI 국제정책대학원|