This paper attempts to (i) describe the causes of the banking crisis and procedures of crisis resolution, (ii) summarize policy issues, and (iii) draw policy recommendations. It has four sections: (i) overview of the Korean banking sector, (ii) recent developments in the banking sector, (iii) policy issues, and (iv) policy recommendations. The first section shows how the banking sector has grown rapidly in the last 50 years and contributed significantly to the country’s remarkable economic growth by mobilizing financial resources for business firms. However, selective credit allocation and prolonged interest control—the primary tools of economic development in Korea—have resulted in an inefficient and distorted financial system. Extensive Government involvement in the interna
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