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Enhancing bank governance in Korea through stronger partnership among stakeholders

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Frame of Image ision are being adopted to address this problem, but these have limits to ensuring sound management at the actual places where management decisions are made. To convince banks to improve their governance structures on their own, it's critical to cultivate strong corporate cultures by enhancing partnership among stakeholders, supplementing the monitoring and supervisory powers of boards of directors. Active government support is also called for in the form of guidelines, as is consistent attention from customers.
* Opinions expressed are those of the author and do not necessarily reflect the official positions of the Korea
Institute of Finance.
Historically, banks, like other private companies, have been enterprises that freely pursue profits, generating fees by offering financial services such as remittances, currency exchange, and loans. A bank, however, begins to take on the status of a public entity when its deposits are accepted as money. The problem is that, as banks come to take on the function of money supplier that they had not originally intended to, they also become able to take on far higher levels of leverage than an ordinary company. Government regulation in this respect has arisen out of the potential for this to destabilize the financial system. Since banks have far higher liability ratios than other companies, shareholders bear relatively much less of the burden when losses occur. In addition, excepting smaller banks, it is often the case that there are no maj


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Title Enhancing bank governance in Korea through stronger partnership among stakeholders
Similar Titles
Material Type Reports
Author(English)

Seoh, Geun Woo

Publisher

Korea Institute of Finance

Date 2010
Journal Title; Vol./Issue Weekly Financial Review:19/44
Pages 6
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Economic System
Economy < Direct Investment
Holding Korea Institute of Finance

Abstract

Banks have become able to take on higher amounts of leverage and embody the status of a public entity as bank deposits have become accepted as money. This appears to be weakening shareholders' incentive to monitor management by means such as the appointment of executives. Various prior regulations and posteriori supervision are being adopted to address this problem, but these have limits to ensuring sound management at the actual places where management decisions are made. To convince banks to improve their governance structures on their own, it's critical to cultivate strong corporate cultures by enhancing partnership among stakeholders, supplementing the monitoring and supervisory powers of boards of directors. Active government support is also called for in the form of guidelines, as is consistent attention from customers.