This report aims to look at our country’s basis for its financial policy, and to explain the needs for financial reformation and a new promotion strategy by analyzing the current status and problems of Korea’s finance sector. Korea’s financial industry looks to be in good shape but, in fact, its international competitiveness is low due to a regressive system and practices. The industry’s efficiency, integrity and competitiveness have been weakened by the regulating and protecting policies that have been in place for a long time. Large problems were created by government-level relief measures so the industry has a low self-recovery ability and international creditworthiness.
Our country’s financial regulation method is not the indirect regulation method, which improves financial efficiency and keeps public transparency, but the direct regulation method, which directly manages and controls the cash flows. In particular, under the government’s control, large investments are made without first- or second-level screenings to evaluate their integrity and, in case of failure, it has been a practice to rescue the industry by burdening the public. Such practices have hindered the efficient distribution of cash and economic advancement. These widespread regulations and interventions not only hindered financial development, but they also lowered the contribution of the financial sector as an industry, which in turn hinders national competitiveness. In Korea, under regulations, there were low price volatilities so the need to develop the ability to cope with them was low and development was framed by restrictions. Therefore, we have weak ability to cope with and predict volatility risks in various interest rates, exchange rate and credit risks, as well as to analyze risks.
Although the government has taken various actions to ease regulations such as carrying out financial liberalization and creating the Administration Renovation Committee, regulations related to finance have not been eased much. This is because these actions were not implemented in the overall framework, and more of a focus was put on improving the process than on improving the core items. Therefore, in order for the actions designed to ease regulations to take roots in substance, the government should transform ideas, reorganize the system and establish supplementary laws.
To strengthen national competitiveness, the following financial reforms have been proposed. This report puts together various plans; financial reformation, ease of regulations, liberalize the entry barrier of financial institutions and smoothing out exits, reorganization of currency control-financial supervisory system, improvement plans for efficiency of financial market information, advancement of corporate finance, implementation of long-term financial market, reorganization of government-related financial institutions, establishing financial policies to expand economic cooperation between South and North Korea, and taking off to an international finance center. It is expected that the successful achievement of these financial reforms will revive Korea’s economy by improving its overall ability to finance, and it will enable Korea to achieve the strategic industrialization of finance sector that corresponds to the information era.
금융개혁 통합보고서(The comprehensive report on financial reformation)
[서울] : 금융개혁위원회
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|