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Readjustment of the Business Boundaries of Financial Intermediaries in Korea

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  • Readjustment of the Business Boundaries of Financial Intermediaries in Korea
  • Nam, Sang-Woo남상우
  • Korea Development Institute
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Title Readjustment of the Business Boundaries of Financial Intermediaries in Korea
Similar Titles
Material Type Reports
Author(English)

Nam, Sang-Woo

Author(Korean)

남상우

Publisher

Seoul:Korea Development Institute

Date 1988
Language English
File Type Link
Subject Economy < Financial Policy
Holding Korea Development Institute

Abstract

The experience of the Federal Republic of Germany and the United States before and after the Glass-Steagall Act of 1933 indicate that universal banking can provide considerable benefits while posing few problems for the economy. Universal banking is likely to result in more financial stability as banks undertake diversified activities and are less vulnerable to government intervention in credit allocation, the latter with potentially disastrous consequences. Due to economies of scope and more efficient monitoring of borrowing firms by banks, universal banking enhances the efficiency of intermediation and tends to support economic development more effectively.
Furthermore, frequent charges that universal banking leads to concentration of power, reduced competition and conflict of interest abuses are found to be unsupported. Rather, a specialized banking system seems more conducive to the development of coalitions for political power and conflict of interest abuses. The experiences of the advanced countries thus clearly indicate that universal banking could be Korea's long-run goal.