Top Regulator Advocates Financial Big Bang
By Park Hyong-ki
Staff Reporter
Financial Supervisory Commission Chairman Yoon Jeung-hyun said a ``big bang'' is necessary for Korea's financial industry to make a leap forward and become a ``great market'' in the region.
Speaking at the Korea Economic Forum in Seoul, Wednesday, the chairman stressed that Korea should search for its next and new growth engine to maintain its competitive edge over high-tech Japan and fast-growing China.
He said the financial industry should provide key leverage for Korea to achieve its goal of becoming a hub of Northeast Asia.
``We know that all developed countries with a per capita income of more than $30,000 have advanced financial industries,'' said Yoon. ``This suggests that the development of the financial industry is strategically important for Korea to accomplish its hub goal.''
To this end, a free trade agreement with the U.S. will help open the financial market wider for more competition and transparency with an introduction of a variety of new products for consumers, he said.
Yoon added that this and other prospective accords such as the Korea-E.U. FTA will not only bring challenges to the financial market, but also opportunities for Korea to enhance its industry and regulatory system to global standards.
The Capital Market Consolidation Act (CMCA), aimed at breaking down the walls between securities, futures and asset management firms, is expected to become a trigger for the big bang. The government wants the passage of the bill at a parliamentary session early next month to help foster investment banks that are globally competitive like Merrill Lynch and Goldman Sachs.
``The act will require a change (for the industry) in strategic focus from domestic to overseas markets,'' said Kim Hyoung-tae, vice-president of the Korea Securities Research Institute. `` It will provide a more favorable framework for investment banks in Korea.''
Korea's financial big bang copies a series of reforms initiated by London in 1986 when the city aimed to blur the walls separating securities businesses as well as bring an end to fixed commissions in an effort to boost competition.
Experts say while it only promotes financial investment products and overlooks the banking and insurance industries, the act will have a tremendous effect on the asset management and securities markets.
``The act is not going to dramatically change (the financial industry) overnight as the CMCA is part of broader measures for Korea to upgrade its capabilities,'' said James Ahn, principal of McKinsey & Company. ``But it is an important step forward.''
It will also take more than the act to ignite the big bang to advance Korea's financial market in a similar scale to other Asian nations such as Singapore and Hong Kong.
Experts say language barriers remain as an issue as Korea lacks in English communication ability compared with those Asian nations.