Good banks, bad banks, ugly banks
"We have to rebuild our credibility with the international market," says Lee Hun-jai, one of the last scions of Korea's ancient monarchy, and as chairman of the recently formed Financial Services Commission the man in the hottest seat in Korea's battle to stabilize its economy. "To do that we have to go through the 'paradox of credit transparency'. That means our problems will be disclosed and foreign investors may not want to do business with us. But if we keep our existing system no one will be convinced of any changes."
So far, despite some encouraging signs - the recovery in the Korean won since the turn of the year, surges in the country's foreign reserves and a large current-account surplus - Korea is doing a poor job of convincing foreign investors that its system can change. Corporate debt is increasing and profits are falling, with little real sign yet of the restructuring needed for fundamental recovery.
Improvements in Korea's terms of trade this year are tipped to vanish as exporters slash margins to try to lift capacity utilization from an average of below 60%.