This study aims to clarify what the current trend of financial globalization means to the Korean economy, and to find out tasks, strategies and measures for effective financial globalization.
Given that the failure of the financial sector to match the developing real economic sector often hampers the growth of the real sector, and that Korea’s financial industry falls far short of its real sector, the country’s further economic growth requires advanced financial globalization matching the rapidly globalizing real sector as a vital policy priority. Financial globalization, if narrowly understood, means the globalization of financial institutions where they expand their international operations, financing and running their funds in a global scale through setting up branches abroad. If broadly understood, however, it includes allowing foreign financial firms to enter and operate in domestic markets, and globalizing the domestic financial sector.
Behind the recent globalization of Korea’s financial sector lies the need to secure foreign funds, which was caused by the expansion of foreign transactions resulting from the country’s outward-looking economic development. Financial globalization removes barriers to the cross-border flow of capital, thereby raising marginal efficiency of investments, expanding trade, and eventually enabling a balanced growth of global economy. It also raises financial efficiency through promoting the market function, diversifying services, and helping to improve loan conditions through increased financial availability and easier access to foreign funds. Korea’s financial globalization requires establishing effective strategies, securing international competitiveness of domestic financial institutions, guaranteeing foreign banks’ entry into the domestic markets, and globalization of both the domestic financial sector and the Korean currency.
Overseas expansion of Korea’s banks necessitates diversifying modes and regions of their global operation, and raising their operational efficiency. Regarding foreign banks’ opportunities to compete in the domestic markets, the Korean government should gradually open up the domestic financial sector, while continuing to regulate the foreign banks’ operations related to foreign exchange. Because the necessary conditions for financial globalization have not matured in Korea, and threats of conflict in northeast Asia still remains, it is recommended that the Korean government push for financial globalization after the required conditions have been accomplished, for example, a significant level of globalization in the real sector, with a final objective of domestic financial globalization.
금융국제화의 당면과제와 정책방향
[서울] : 한국개발연구원
|Series Title; No||연구보고 / 84-04|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||KDI; KDI School|