ABSTRACT
This chapter discusses complementary institutional safeguards which should be strengthened in tandem with the reform of the financial system to minimize financial instability during the transition. Korea has a specialized banking system in which restrictions are placed on the types of financial services offered by different financial institutions. Growing pressure from abroad, often on the basis of reciprocity, together with Korea's liberalization policy will work to increase the openness of the Korean market to foreign investors and financial intermediaries. Reciprocity requirements by countries with universal banking systems will have a direct bearing on the shaping of the Korean financial system. The Korean stock market has also suffered from frequent price manipulation through self-dealing, bull cornering, and dumping. In Korea, where deposit-taking institutions are relatively few in number, variable rate premiums may be more feasible than in other countries. Extensive ownership of financial institutions by large business groups makes financial supervision a particularly demanding task in Korea.
