This document was prepared in August of 1995 by Yoon Jeung-hyun, the former Minister of the Ministry of Strategy and Finance, who, at that time, was the Director General of Finance at the Ministry of Finance and Economy. This study aims to discuss the reformation of the financial sectors through various reformation policies that stem from the ‘Civilian government,’ and it will focus on the direction of the reform, the current status and the problems that it faces.
Former minister Yoon points out that, as our country’s financial institutions managed policy decisions that supported rapid growth at the time, the ‘publicness’ of these institutions was so emphasized that they lost sight of their true mission, which was to improve profitability. This situation led to a lack of competitiveness. Yoon insists that with rapid liberalization, openness and internalization, the financial industry can make changes and improve its competitiveness.
The basic direction of the reformation is the introduction of the terms ‘voluntary’ and ‘competition.’ He suggests that it is necessary to minimize the various financial policies and to reduce or remove loan regulations that apply to financial institutions. Also, they should induce a specialization and an enlargement of financial institutions and reasonably control business areas while at the same time improving the ownership structure of financial institutions in order to enhance the efficiency of management.
The financial reformation policies that have been implemented so far include investigating the performance results of the four level interest rates liberalization plan, reducing the financial policies of the central bank, easing the concentration of economic power through a reformed loan management system and reducing selective financial systems. Furthermore, they created the Ministry of Bank Recommendation Committee to increase transparency in the appointments of financial institutions and grant autonomy to various management-related decision-making processes.
Evaluations have shown that the financial reformation policies can be implemented favorably without any side effects. The real-name financial transaction system has soft-landed, financial liberalization has put its roots down and these structures have helped improve the business management environment.
The last remaining project involves establishing a financial system that corresponds to the globalization era, which includes launching the WTO system and becoming a member of OECD. Through this, companies should be able to increase their international competitiveness, though financial regulations need to be removed if they are to achieve this goal. In the process of removal, complementary policies should be appropriately applied to minimize any potential side-effects.