This paper examines systems related to banks’ participation in industrial capital through theoretical modeling and analyses of current situations.
Historically, banks have introduced universal banking systems or other similar systems from early in their operations. Countries with such systems include the U.K., France, Belgium, the U.S., Germany, and Japan. These countries share a similarity in that they launched industrial banks that participate in industrial capital by making large investments and supplying long-term funds beyond engaging in short-term commerce transactions such as short-term bills. In particular Japan and Germany were able to develop into economically advanced countries, indicating that banks’ participation in capital contributes greatly to economic development.
We can measure the effect of banks’ and companies’ participation in capital under a number of assumptions: One of the assumptions is that until a well-developed capital market in which banks competitively work against a loan market emerges, banks’ participation in industrial capital creates a situation where banks’ profit is regarded in the same light as those of enterprises. In this sense, banks can contribute to corporate growth. However, if a capital market is developed, and companies indiscriminately choose sources of financing from capital markets or lending markets, banks’ contribution to corporate growth might disappear.
Meanwhile, companies can hold shares of banks, in contrast to banks owning shares of industrial companies. In countries with a continental financial system where a capital market lags in terms of competitiveness, banks’ holding of corporate shares can have a positive impact on corporate growth. However, such a positive impact is not witnessed in countries with an
In conclusion, banks’ participation in industrial capital can be useful in facilitating corporate growth, until the creation of a stable capital market which is allows for full competition with a deposit lending market. In countries like South Korea, where a stock market has yet to become established as a source of long-term financing for enterprises, banks’ capital participation will be more effective. To this end, Korea must work towards the establishment of a financial supervisory organization and the improvement of a supervisory plan. In addition, the government needs to employ regulations to prevent industrial conglomerates from irresponsibly advancing into financial business while eliminating imbalanced elements. In particular, if industrial conglomerates own banks, it could break the equality of industrial structure because most Korean banks are small. Therefore, industrial companies’ ownership of banks is not desirable.
은행의 산업자본참여와 경제성장(Banks’ participation in industrial capital and economic growth)
역사, 이론, 실증(history, theory, and substantiation)
서울 : 한국개발연구원
|Journal Title; Vol./Issue||한국개발연구:Vol. 17(Issue 1)|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||KDI; KDI School|