Korean Economic Reform by Robert F. Emery

Author:Robert F. Emery [Emery, Robert F.]
Language: eng
Format: epub
Tags: Social Science, General, Sociology
ISBN: 9781351760089
Google: SwTFDwAAQBAJ
Publisher: Routledge
Published: 2017-07-12T04:34:12+00:00

Assessment of Commercial Banks’ Progress

Korea’s commercial banks have made significant progress in reforming and restructuring the banking system. For example, a consortium of nine banks and the Korea Federation of Bank and Financial Labor Unions reached an agreement on September 29, 1998, to reduce substantially their collective workforce. Since the November 1997 crisis, some 8,000 workers had been let go by the nine banks, and the agreement called for a further reduction of 13,700 workers from the September 1998 total employment level of 45,600 in the fourth quarter of 1998.31 This represented a 40 percent reduction from November 1997. In addition, many uneconomic bank branches have been closed.

Other areas where progress has been made include an increase in the number of outside or nonstanding directors on the board of directors, less one–man decision–making at various banks, better portfolio diversification, and regular use of external, i.e., independent, auditors. Banks have also reduced the proportion of their total foreign borrowing that consists of short–term liabilities and have moved toward adopting international accounting standards. Progress has also been made by the banks in their provisioning of potential NPLs and in providing fuller and more transparent information in the banks’ financial statements.

Less clear is the extent to which the banks have been able to train or hire experts in certain key fields. These are credit analysis, risk management, securities investment, derivatives investment, and foreign exchange dealing. Prior to the November 1997 crisis, relatively little attention was paid to developing expertise in these areas. With increased foreign investment in some of Korea’s banks since the crisis, these banks presumably are benefiting from the expertise injected by these foreign investors.

Also in doubt is the extent to which the commercial banks have been able to reform and restructure Korea’s business corporations. The FSC has clearly stated that it is relying primarily on the banks for this task. It may be some time before it is known whether the banks have indeed played a major and effective role in this task.

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