Recently, bank brass received a stern letter from the Financial Supervisory Commission, the new body tasked with sweeping a broom through the financial sector. The government is under pressure from the International Monetary Fund, World Bank and other international lenders to bring the Korean banking system in line with international standards. One official wonders how the banks will raise such a sum at a time when investor confidence is sagging in tandem with the Seoul bourse. Unless it is recapitalized, the banks may be out of luck.
Negotiations are under way.
Despite all the coming hurdles, it is widely agreed that the reform of the South Korean economy must start with the banks. The labor unions say they are taking the brunt and will not cooperate until the chaebol are restructured. For their part, the chaebol chiefs say they can't reform as long as the banks continue to do business the old way - demanding collateral and payment guarantees, ignoring creditworthiness of individual borrowers and taking their cues from the government. Kim has his reasons for demanding the banks go first. The liquidity crunch has meant higher interest rates and forced marginal firms to go under - an average of 1,000 a month.