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To: c.hinton who wrote (72071)	6/21/2001 6:14:52 AM
From: TobagoJack	Respond to of 116764

Yes, and now the Koreans are working on something very 'brilliant', allowing the debtors to own more of the banks that they had borrowed from. If this passes the political smell test, the Koreans should be buying gold in serious quantities again, before their savings gets inflated, diluted, borrowed or otherwise stolen ... Chugs, Jay news.ft.com QUOTE June 21, 2001 Money & Investing Korea May Let Chaebols Buy Bigger Bank Stakes By HAE WON CHOI Staff Reporter of THE WALL STREET JOURNAL SEOUL, South Korea -- The government may reverse a landmark financial regulation that limits ownership in local banks by the country's chaebols, or conglomerates, a proposal that critics charge is yet another example of how President Kim Dae Jung's government is backtracking on its reform pledges. Finance Minister Jin Nyum said he plans to launch a new initiative to help stabilize the country's debt-ridden financial sector. This would include targeting nationalized banks for investment by conglomerates as part of the government's wider privatization program. If realized, it could result in a fundamental realignment of financial ownership in South Korea. Mr. Jin proposed revising current banking regulations that restrict chaebols to holding no more than a 4% stake in a bank. That cap, introduced in 1995, lowered the limit from the previous 8% as a way of blocking the country's powerful industrial groups from exerting influence over banks' lending decisions. Mr. Jin, however, said Tuesday that he wanted to remove such restrictions. The Finance Ministry said it has yet to decide what the new limit will be or when the new regulations will be implemented. Mr. Jin's recommendation has stirred controversy among many economists. Critics fear that once the chaebols are allowed to own larger stakes in local banks they will find loopholes to turn those financial institutions into private cash dispensers. "It's a move completely retarding economic reform," says Phillip Lim, an economist at Korea Development Institute, a government-run think tank. "The proposal is basically giving the chaebols the rights to dictate lending decisions." Byeon Yang Ho, a director of the policy coordination department at the Finance Ministry, says such financial manipulation couldn't happen because banking regulations wouldn't allow it. Current rules limit a bank to lending no more than 15% of its paid-in capital to any single individual or company, he points out. Mr. Byeon also notes that the government thought it was unfair to bar the chaebols from owning larger stakes in banks when there are no limits for foreign investors. But critics of the new proposal also worry that if a few industrial giants come to dominate the financial sector, the economy will become even more dependent on the chaebols, leaving little room for small and midsize companies to flourish. They also contend that the conglomerates aren't the best choice for solving some of the banking industry's biggest problems: primitive credit analysis and a lack of sophisticated corporate-financing know-how. Reforming the troubled financial sector has been one of the government's top priorities. Since late 1997, it has spent 137 trillion won ($105.06 billion) on restructuring the industry and recapitalizing banks; the government plans to spend an additional 30 trillion won this year. But the banks are still struggling to deal with bad assets and debt-laden borrowers. Uncertainty about the health of the banking and corporate sectors has created nervousness in South Korea's markets -- it was seen as the key cause of the financial crisis that began in late 1997. Economists also say Mr. Jin's proposal shows how quickly President Kim Dae Jung's reform drive is slowing. Last month, the finance minister said the government will ease some of the key regulations -- developed with the guidance of the International Monetary Fund -- that were devised to shape up the conglomerates. Mr. Jin's proposal clearly shows "the government hasn't learned a lesson from the crisis," says Kim Chul Jung, a strategist at J.P. Morgan Securities in Seoul. "Such a proposal [by Mr. Jin] should have been unthinkable." UNQUOTE