February 2001
Intervention, interference or encouragement?
With a first round of bank restructuring that killed off more than half the country’s banks behind it, Korea is now facing up to consolidating what is left, ostensibly to enhance competitiveness and create economies of scale. It’s not clear, though, that the timing is right or that the government’s approach to mergers is appropriate or sufficiently disinterested.
It's been a busy seven weeks in Korea's financial sector,
with the country's efforts to reform the corporate and banking
sectors creating serious conflict. A bank president was held
hostage in his office and the leader of one of Korea's largest
unions went into hiding, leaving his unfortunate deputy to face the
rap - a pair of handcuffs.
On New Year's Eve, W7 trillion ($5.7 billion) was pumped into six
ailing banks in the wake of conglomerate Daewoo's collapse - this
on top of the W64 trillion already injected into the tottering
sector.
Also, despite scepticism from the IMF, a plan to consolidate five
banks, creating what some cynics have dubbed a mega-ailing bank,
was put under starter's orders. The government itself has faced a
barrage of accusations that it has meddled in the private business
affairs of a major bank. And on top of all this, concerns are
mounting about the effects on Korea...
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