Financial Reform in Korea: Unfinished Agenda

Since the financial crisis in 1997, Korea has achieved many positive changes. ranging from stronger balance sheets of financial institutions to significant efficiency gains at the operational level. Despite the marked changes, however, much work still remains ahead for Korea's financial system. This paper reflects upon what has transpired since the containment of the crisis and further discusses emerging issues. Prudence in lending policy exercised by financial institutions should be further improved. Although they are not likely to develop into a systemic risk, corrective actions must be taken on structural problems such as excessive debts carried by households and small and medium-sized enterprises. Flow of funds should be normalized by revitalizing long-term capital market.