Korea's financial evolution: A personal perspective

When the Asian financial crisis first reared its ugly head in South East Asia, nobody knew how long, how awful, and how catastrophic Asian money centers would be rocked. And rocked they were, especially in Korea, as well as several other economies. Running a trade deficit for several years leading up to 1997, when several firms began to go bankrupt, Korean financial markets panicked, and fear took over. In late 1997, foreign banks,which had extended short-term credit to many Korean financial institutions, left a dust trail as they all bailed out, leaving banks and the Korean central bank clamoring for liquidity. The stock market and the won were devalued by about 50 percent as fear swept through the nation. Newspapers across the globe showed women hawking their jewelry and crying, while nationalism set in and everyone bought Korean instead of foreign goods. The International Monetary Fund and other global financial institutions all joined hands to help, and to this day, economists and other officials argue about how effective the IMF was or was not in the region.It was a dramatic moment in Korean financial history, but the results were spectacular. The government set high standards in the financial sector and forced banks to merge and restructure. New laws were set in place. And for the first time, the ownership of financial institutes was opened to foreign direct investment. Enter Robert Fallon, Chairman of Korea Exchange Bank, a $60 billion institution and the leading international bank in South Korea. In spring 2004 Mr. Fallon became the first foreigner to chair a publicly traded corporation in the history of South Korea after the U.S. investment group Lone Star took over the bank in 2003. He has charismatically led the bank's turnaround through vigorous restructuring, with bank profits reaching $509 million in 2004, after a $209 million loss in 2003. On February 28, 2005, the APEC Study Center (ASC) and the Program on Alternative Investments of the Center on Japanese Economy and Business (CJEB) at Columbia University hosted a symposium featuring Mr. Fallon about the evolution of Korea's financial sector. Lee Branstetter, Daniel W. Stanton Associate Professor of Business, presided,and Mark Mason, Director of the Program for Alternative Investments and Associate Director for Programs of CJEB, was the moderator