Press Releases - Financial Services Commission

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May 21, 1998

Chairman`s Speech at Seoul Foreign Correspondent`s Club

Ladies and gentlemenIt is my honor to have this opportunity to share with you the framework and the key elements of the restructuring package for the financial and corporate sectors in Korea.As you know, Korea is currently facing crucial challenges. At the core of them lies the successful installation of new rules into the Korean economy.In the past, the government-led economy has had serious market imperfections, in particular, deep rooted problems with capital resource allocations and business opportunities.Past industrial policies has traditionally meant capacity-driven policies for the largest companies and have created a vigorous demand for new capital in the rapidly growing economy.In other words, many Korean industries have experienced a short supply of monetary capital. This has been the result of commercial banks focusing on funding government-led projects rather than lending to competitive markets.This is evident from the long lines of borrowers knocking on the doors of the banks. This tradition has distorted the fair allocation of credit.Only large companies with sufficient collateral had been the beneficiaries of the limited credit resources while small to medium sized companies had been subject to a constant credit crunch.In turn, large companies have been active in expanding their production capacity and diversifying into new and often non-competitive businesses with borrowed capital. Thus, high leverage and thin margin are common characteristics of the Korean companies.As a result, the non-performing loans increased astronomically and the Korean economy lost its credit from the international financial circles.To restore as quickly as possible international credibility in Korea, the government will gather all of its capacities to execute the restructuring programs.Ee strongly believe that any delay in implementation will increase the cost of restructuring exponentially and decrease our chances of a prosperous future. Restructuring is not a matter of ch
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