SOUTH KOREA STUDIES RESTRUCTURING FINANCIAL SECTOR
Deputy prime minister Kim Mahn-je said
South Korea is studying various measures to reform what he
described as its underdeveloped bank and financial sector.
    Kim, who is also economic planning minister, told a news
conference the country's banks and finance houses had not
developed to keep pace with their industrial counterparts.
    He said two major factors had hampered the development of
the financial sector -- high inflation and heavy government
intervention in bank decision-making.
    He said in the past the government had pressed banks to
give soft loans to industry to boost economic growth.
    Kim said the government would now give top priority to
interest rate liberalisation. This could be achieved within
several years, though not within one year.
    He said liberalisation was possible because South Korea's
current account had turned from a deficit to a surplus, which
had brought in foreign funds and increased domestic savings.
    The current account recorded a surplus of 4.65 billion dlrs
in 1986 after a deficit of 890 mln dlrs in 1985.
    But Kim said the government needed to reorganise much of
the financial sector.
    Kim said mergers of some financial companies and the
upgrading of others to merchant banks or full banks were being
considered by the financial development committee of the
finance ministry. He did not elaborate but said he expected no
drastic measures to be announced this year.
    On liberalisation of the country's stock market, Kim said
despite Seoul's determination to open it up, free investments
there by foreigners would not be allowed in the near future
because the market was currently "over-heated." He said this was
due to ample liquidity created partly by the country's current
account surplus.
    Kim said the market was extremely vulnerable to a sudden
influx of foreign funds because it was still very small in
terms of size and numbers of shareholders.
    "Opening up the capital market must wait until the
vulnerability to such an influx is removed," he said.
    He said only about one mln South Koreans, out of a
population of 40 mln, invest in the Seoul market.
 REUTER
