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Korea - Financial Intermediation Project (English)

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  • Korea - Financial Intermediation Project (English)
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Title Korea - Financial Intermediation Project (English)
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Material Type Reports
Publisher

World Bank (WB)

Date 1999
Language English
File Type Link
Subject Economy < Financial Policy

Abstract

The project is rated satisfactory, and sustainability is likely. While the performance of the Borrower is satisfactory, largely due to substantial achievement of project objectives, the performance of the Bank is unsatisfactory, based on poor quality of project supervision. Among the lessons learned, the experience of this operation conveys that long-term solvency of financial institutions, in a deregulated environment, requires prudential regulations, effective supervision, and transparency in accounting and information systems, for better management accountability. Thus, difficult decisions should be taken by the governments, particularly, during a financial crisis, to prevent further exacerbation. The Bank should then, not only, pursue a commitment to deregulate financial systems, but agree on a detailed action plan, and its prerequisites for rapid deregulation, to improve, and facilitate effective monitoring of project implementation. Since weak financial institutions are often driven by strong government directions, which influence banks' lending decisions, it is implied that the financial position, and performance of institutions may not be as reported. This led to a build-up of institutional development programs, but mixed results show that these are at best, limited to impact the corporate, and banking practices. Emphasis is placed on the adequacy of staff, and budget allocation for essential supervision.