The Political Economy of Reforming Financial Supervision in South Korea

Abstract

This study examines the reform trajectory of financial supervision in South Korea after the 1980s, focusing on external and internal political–economic factors. Research results indicate that the changed economic landscape led the government, which once utilized financial supervision as a tool to support industrial policy, to alter its aims and pursue the development of the financial market itself. During this transformational process, the 1997 Asian financial crisis functioned as a powerful stimulus for the reform of the previous supervisory system. The process was also marked by social actors’ efforts to affect related policies and the government’s efforts to control the reform process, as well as confrontations between organizations that supported contradictory reform plans. A multi-strategy approach including in-depth interviews with a senior staff member from a government financial regulatory agency, literature reviews, and secondary data collection, was adopted in order to enhance the validity and reliability of this paper.