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Korea's financial sector includes a diverse commercial
banking system, a wide range of secondary financial institutions,
and a securities market. Financial institutions can be divided
into two main categories: monetary institutions and other
financial intuitions. The former includes the Bank of Korea
- the nation's central bank - and deposit-taking banks.
The cornerstone of South Korea’s financial liberalization
was laid in December of 1988, with the extensive deregulation
of interest rates of banks and of the non-bank financial
services industry. Entry barriers were further lowered and,
in 1989, three new commercial banks were established. In
a similarly motivated development, a number of securities
investment trust companies were set up in 1989 and, in the
four-year period from 1987 to 1990, eighteen life insurance
companies were established. The latter comprised thirteen
domestic companies and five joint-venture companies. In
addition, four foreign life insurance companies were allowed
to open branches in Seoul.
The commercial banks have all greatly increased their paid-in
capital, thus boosting their competitiveness and raising
their international stature. For the internationalization
of the financial market, the shift of the current account
to a surplus in 1986 also proved to be a watershed. Domestic
commercial banks have been diversifying their overseas networks
by establishing more subsidiaries and branches abroad, bringing
their total numbers up to 53 at the end of June 1990. Foreign
bank branches in Korea, whose numbers stood at 67 as of
June 1990, have been placed on an equal footing with domestic
banks by the lifting of certain restrictions on their operations
and, at the same time, a contraction of their privileges.
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