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The Korean banking sector : Current issues and future direction

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  • The Korean banking sector
  • Ji, Donghyun; Park, Jaeha
  • Asian Development Bank


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Title The Korean banking sector
Similar Titles
Sub Title

Current issues and future direction

Material Type Articles
Author(English)

Ji, Donghyun; Park, Jaeha

Publisher

[Metro Manila]:Asian Development Bank

Date 2006-06
Journal Title; Vol./Issue A Study of Financial Markets:
Pages 28
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Financial Policy
Holding Asian Development Bank

Abstract

This paper attempts to (i) describe the causes of the banking crisis and procedures of crisis resolution, (ii) summarize policy issues, and (iii) draw policy recommendations. It has four sections: (i) overview of the Korean banking sector, (ii) recent developments in the banking sector, (iii) policy issues, and (iv) policy recommendations. The first section shows how the banking sector has grown rapidly in the last 50 years and contributed significantly to the country’s remarkable economic growth by mobilizing financial resources for business firms. However, selective credit allocation and prolonged interest control—the primary tools of economic development in Korea—have resulted in an inefficient and distorted financial system. Extensive Government involvement in the internal management of financial institutions has undermined the autonomy and accountability of management. Lack of an effective supervisory system resulted in excessive risk taking and moral-hazard problems plaguing the industry. (The rest omitted)