The economic and market integration of the stock market, insurance market, and the financial market of the European Community (EC, now known as EU) will form a single economic entity. This study will describe the economic integration within the European Community, with the introduction of a single EC-wide banking license system, reciprocity, and the universal banking system. This study also analyzes its effects on international trade order and the responses of South Korea and other countries.
Two major issues of the EC financial sector are currency and financial integration, and the EC is gradually removing the regulations on the liberalization of financial services including banking, securities, insurance, and capital movements. In addition, regulations of EC member states have been reduced after a long period of liberalization. It also appears that the EC will take measures to enhance monetary and currency stability in order to strengthen the European monetary system and to expand use of the ECU (European Currency Unit). The European Commission has decided to use the same corporate tax system within the region and remove existing discriminative taxation. Moreover, the guidelines for the introduction of common original projects was proposed in order to prevent tax evasion in case the capital movements were liberalized within the area.
The EC aims for the coordination of basic financial regulations between member states in terms of tax exemption, adequate capital, and deposit insurance systems, which are necessary to guarantee the safety of banks and other financial companies. The EC chose the principle of mutual recognition as a guideline for supervising financial companies that will be used as major policy instruments to attain financial integration. As stated in the white paper on the completion of the internal market (1985), mutual recognition of financial services and the qualifications of EC member states are listed and approved. This has become a major turning point in EC policy-making, and will influence more than the banking sector alone.
Meanwhile, the single EC-wide banking license system will promote financial liberalization within the member states. Foreign banks will be able to gain competitive advantages over domestic banks, so the financial supervisory authorities will eventually ease regulations in order to protect domestic banks. Thus, if the financial authorities of each member state start to reduce regulations, this will eventually lead to increased competition and the financial supervisory authorities will avoid to accept or even maintain more strict standards than the joint European guidelines. In the long run, due to greater competition between markets, the regulations of the member states will naturally become equivalent.
Financial companies in South Korea stands a chance within the area as a local corporation or by providing wholesale banking services, but Korea should gradually open its domestic financial market. By entering the European Community, Korea must adopt the financing and investment techniques of Europe, and by incorporating these specific techniques, real economic and financial internationalization is expected. Furthermore, in order to improve workability and develop the financial industry, considering the financial market environment and financial internationalization, financial companies have restructure and reconsider business strategy. In addition, authorities must support these acts by reducing and improving regulations.
EC 금융통합과 정책대응(EC financial integration and corresponding policies)
[서울] : 한국개발연구원
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||KDI; KDI School|