OECD Economics Department Working Papers
Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.
- ISSN: 18151973 (online)
- https://doi.org/10.1787/18151973
The Korean Financial System
Overcoming the Global Financial Crisis and Addressing Remaining Problems
The intensification of the global financial crisis in late 2008 led to large capital outflows from Korea and turmoil in its capital markets. However, the prompt response by the government and the central bank stabilised Korea’s financial sector in early 2009 and recovery followed relatively quickly. In contrast to 1997, financial institutions have overcome the crisis without significant damage. Increased assistance for small and medium-sized enterprises has played a large role in overcoming the crisis, but should be scaled back to avoid supporting non-viable firms and to expand banks’ capacity for risk appraisal, leading to a more market-oriented financial system. As a small open economy, Korea also needs to reduce its vulnerability to sudden capital outflows. In addition, it is important to use prudential regulations effectively to limit the risk of mortgage lending, upgrade the corporate governance of financial institutions and develop securitisation by ensuring transparency.
Keywords: bank, Korean financial sector, Bank of Korea, LTV, capital markets, securitisation, FSS, KAMCO, credit rating agencies, short-term foreign debt, global financial crisis, small and medium-sized enterprises, foreign exchange reserves, housing prices, Basel II, capital injections, capital adequacy rules, FSC, DTI
JEL:
Q54: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Environmental Economics / Climate; Natural Disasters and Their Management; Global Warming;
Q28: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Renewable Resources and Conservation / Renewable Resources and Conservation: Government Policy;
Q56: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Environmental Economics / Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth;
Q58: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Environmental Economics / Environmental Economics: Government Policy
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