Financial Stability and the Public Agencies Concerned(Vol7. No.2)
Professor, Department of Economics, Gyeongsang National University, Chinju, Kyung- nam, Seoul 660-701, Korea (Tel: +82-55-751-5747, E-mail: firstname.lastname@example.org).
In Korea, the authoritative vertical hierarchy, as opposed to the functional horizontal relationships, has taken deep root between the public agencies that are responsible for the financial system. This paper offers a theoretical review of their respective roles, the importance of supervisory cooperation and checks and balances, and of the preconditions to make such cooperation and checks and balances effective. This paper turns to the current prudential problems of credit-card companies and of households. It traces back the whole course of the supervisory process for several years, arriving at the finding that all those problems are the consequence of supervisory failure, which is mainly due to policy dominance that the Ministry of Finance and Economy has wielded upon other public agencies so far and to the resulting absence of interagency supervisory cooperation and checks and balances. Also discussed are the ways to encourage supervisory cooperation and checks and balances between the public agencies.