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KCI등재 학술저널

Market Failure and Financial Consumer Protection in Korea

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Since the global financial crisis in 2008, there have been regulatory financial reform and measures to protect financial consumers in many countries. This paper examines the effectiveness of the regulations on sales activities as preemptive measures, such as the principles of suitability, the principle of adequacy and the duty to explain. We reviewed the KIKO and the Woori Power Income Fund cases in Korea. In both cases, the regulatory measures were in fact very weak for protecting the financial consumers, who have not recovered much damage. In these cases, both the financial institutions and the financial consumers tried to maximize their profit under asymmetry information and knowledge with limited rationality of financial consumers. Under these circumstances, the effects of stronger regulations on sales activities are expected to be limited. Successfully introducing independent financial advisory would therefore be very important in Korea and an independent financial consumer protection organization, if established, could provide official financial advisory services. The structure of financial products should also be evaluated at the stage of production to prevent monopolist prices in financial markets. Policies for consumer financial protection should be more focused on market efficiency criteria rather than on violations of specific sales activities. In the context of globalization and capital flows, financial consumer protection issues should be addressed not only at the individual country level but also at the level of international organizations such as APEC.

Ⅰ. Introduction

Ⅱ. Trends in Financial Consumer Protection in the Major APEC Member Economies

Ⅲ. Two Cases in Korea

Ⅳ. Market Failure and Market Efficiency

V. Conclusion

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