Banking Sector
- yellow knifeTop contributor
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Re: Banking Sector
Therefore banks were forced to merge by passing the Banking Act.
This simply opened the way for a few huge Zaibatsu ( Japanese term for Korean Chaebol ) banks to emerge. The four biggest ones came to control credit and its getting out of Government control.
Goldilocks understand too little is also bad..
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Japanese got into second world war and Military Dictators closely aligned to Zaibatus banks to get military equipment produced .
- yellow knifeTop contributor
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Re: Banking Sector
Zaibatsu ownership of banks were ended.
The SCAP acquiesced in the setting up of a powerful Ministry of International Trade and Industry (MITI), which provided direction to the banking system.
Bank ownership was distributed among diversified groups of corporate owners with the typical investor holding a fraction of 1%. This left MITI with no competitors in providing directions to the financial system.
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- yellow knifeTop contributor
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Re: Banking Sector
But the Japanese got the very best out of what SCAP left them. MITI , banking system all were utilized properly without destroying what is left..
Earlier Regime of SL were merging banks and NBFIs. New regime immediately destroy that...
The Japanese state exercised control over the banking system via a mechanism called re-discounting..
In post-war Japan, qualification for re-discounts depended on the export performance and sector focus of the firm that commercial banks ultimately lent to.
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- yellow knifeTop contributor
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Re: Banking Sector
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Japanese corporations depended on the banking system for 40-50% of their funding requirements. That was 30% in Germany and 20% or less in UK and US.
- yellow knifeTop contributor
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Re: Banking Sector
Corporations are like Children. During Infancy they need guide, control , support but the more they grow they seek independence.
By mid 1980s Japanese well established firms were going global and finding funds at cheaper rates outside and .......
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Akio Mortia of Sony got listed Sony in US stock exchange and wrote a book on How to get Listed in US, which paved way for other big companies to get listed in US and get zero cost funds.
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Re: Banking Sector
Banks were deregulated. (Dog got out of leash )
Money was freely flowing to non-productive assets. Real estate price was booming up... Stocks were creating bubble.
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From the winter 1989-90 the asset bubble began to deflated and stock market index fell by three quarter and real estate value plummeted to rock bottom.
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The eldest son of Nishiyama Koichi, the diary-writing Niigata farmer, lost the family's entire accumulated wealth playing in stock market.
- yellow knifeTop contributor
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Re: Banking Sector
Time to revisit bubbles
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What Japan was developing till 1980 before deregulation of banks were real assets but after deregulating , was paper assets
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- yellow knifeTop contributor
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Re: Banking Sector
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- yellow knifeTop contributor
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Re: Banking Sector
- yellow knifeTop contributor
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Re: Banking Sector
- yellow knifeTop contributor
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Re: Banking Sector
Before moving further studying Korean Banks, lets have a look at the importance of Sri Lankan state banks...
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- yellow knifeTop contributor
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Re: Banking Sector
But Park Chun Hee's Korea was very aggressive. Re discounting of export loans were unlimited. In other words any bank that lent against exports as proven by a letter of credit from a foreign customer got almost as much as money back from the Central Bank in order to further expand its loan book.
Unlimited re-discounting and printing money lead to inflation.
As long as Korean firms were following the developmental plan and could sell their goods abroad, the banks were told to lend them.
It was this funding context that exports rose an average 40% a year in the 1960s over 25% a year in 1970s, increasing from 3.4% of GDP in 1960 to 35% by 1980s.
Meanwhile inflation averaged 15-20% annually.
- yellow knifeTop contributor
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Re: Banking Sector
The cheaper loans went to exporters.
Other favoured category of loans flew to industrial projects which have not yet commenced exporting
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Many countries do not consider Export as a special priority for Lending as seen above of Indian AWPLR
- yellow knifeTop contributor
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Re: Banking Sector
The remaining chunk of private savings found its way into illegal but tolerated NBFI sector and known as Kerb Market.
- yellow knifeTop contributor
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Re: Banking Sector
In the same country borrowing rate for consumption in the " Kerb Market " (illegal but tolerable NBFI sector ) was 18.5%.
There were 221 different types of preferential loan for heavy industrialists.
- yellow knifeTop contributor
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Re: Banking Sector
In Sri Lanka when we select the best Revenue makers as BOC, PB and the banking sector it is the manufacturing sector that comes in South Korea today..
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South Korea’s got its eggs in two baskets
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- yellow knifeTop contributor
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Re: Banking Sector
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- yellow knifeTop contributor
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Re: Banking Sector
When risk came home to roost in a major crisis that began in 1969, General Park, forgot his promise to US advisers to regard savers and price capital according to the market, enforcing a three year interest moratorium on kerb lenders that in effect made the general public bail out the industry. Ordinary Koreans provided most of the kerb's funds, while Chaebol sourced marginal loans there that they could not obtain from banks. By stopping payments on this high interest debt Park freed up Chaebol funds to pay their bank debts, and prevented bank collapses. The public lost its interest income from the kerb market, while bank rates were cut again.
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mor·a·to·ri·um
ˌmôrəˈtôrēəm/
noun
noun: moratorium; plural noun: moratoria; plural noun: moratoriums
In SL we heard this term Moratorium in 2008 when we were facing the Forth Eelam war, accompanied by Tea and Rubber price down.
- yellow knifeTop contributor
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Re: Banking Sector
- yellow knifeTop contributor
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Re: Banking Sector
But there was not the kind of collapse in individual saving that the many economists predicted.
In par this was because savers were less sensitive to deposit interest rates than the mathematical models favoured by economists assumes: savers focused instead on the need to hold money against future liabilities a state with little welfare. In par, the savings also held up because it was not easy to consume, especially if this involved using foreign exchange. Imported consumer goods were either banned or enormous expensive due to high tariff.
- yellow knifeTop contributor
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Re: Banking Sector
We at Sri Lanka are happy to hear that EXIM bank will be incorporated . Investment Banking, Hedge Funds, well developed derivative markets are yet to follow and adding Venture Capital is a good move to be on the cards.
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In the 1960s and 1970s Korea had been the fasterest rate of foreign debt accumulation in the world. By 1985 Korea was the second most internationally indebted developing country after Brazil.
However because of its emphasis on exports, Korea's foreing debt payments relative to its foreign exchange earnings actually declined from 1970. Payments of interest and principal as a share of exports were 28% in that year and only 20% in the early 1980s.
Export discipline was Korea's financial get-out of jail card.
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Today's daily mirror had an article with following chart.
By Chandeepa Wettasinghe
The government will be forced to delay the capital investment projects if the revenue targets outlined in the Budget are not met, the global credit rating agency, Moody’s Investors Service (Moody’s) warned.
“If revenue underperforms during the year, as it has in the past two years, authorities may have to revisit investment plans to meet deficit targets, since recurrent expenses will be difficult to roll back,” a report said. - See more at: [You must be registered and logged in to see this link.]
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- yellow knifeTop contributor
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Re: Banking Sector
Traditionally banks are very conservative and prefer to diversify risk.
This is how SBL is imposed in Sri Lanka and is a prudential measure.
Risk Diversification
Exposure Limits
The Single Borrower Limit (SBL) for domestic
LCBs and LSBs is 30% of the banks’ unimpaired
capital (defined as Tier-1 capital and 50% of
revaluation reserves). In order to further limit large
exposures (and hence concentration risk), the
aggregate of all loans/advances exceeding 15% of
capital funds should not exceed 50% of the total
advances of the bank
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In South Korea Chaebols were very powerful that banks were compelled to grant them loans at cheap rates. With the Chabols both heavy and leveraged ( average debt was more than five times equity in the fifity biggest firms) the state banking system could no longer impose its will on businesses whose failure would bring down the banks itself. In the 1980s Chaebols started to buy small firms than competing with them and even banks funded that move.
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The IMF, WB, the US government and gorup of Korean economists trained in US and becoming powerful in President Chun Doo Hwan era collectively argued that its time to deregulate finance industry. They got public support for curbing Chaebols.
The banks were privatized with a maximum 8% shareholding by any one investor, whcih ensured some independent from Chaebol influence. However, the central government continued to set banks credit quotas and interest rate ceilings and to appoint senior managers.
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Re: Banking Sector
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regulations of maximum share ownership in banks are implemented in many countries through several methods, i.e., specific provisions in the banking laws specifying the limits, regulations issued by the regulators specifying the limits in terms of banking laws and guidelines issued by the regulators. However, country practices in regulation of share ownership show diverse literature where it is difficult to derive a standard international practice.
Regulations in other country
There are a large number of countries without such regulation as well. According to a survey of 157 countries conducted by the World Bank in 2003, 112 countries (71 percent) did not have any limitations on bank ownership. The remaining 45 countries (29 percent) implemented ownership limits ranging from five percent to 50 percent.
Provisions in the
Banking Act
In terms of the Banking Act, which contains provisions relating to regulation of share ownership, the maximum limit of ownership in shares carrying voting rights that can be acquired or held by a single shareholder or a group of connected shareholders in a commercial bank without regulatory approval is 10 percent of the issued shares carrying voting rights.
However, the Monetary Board of the Central Bank, with the concurrence of the Finance Minister, is empowered to permit any acquisition of shares in excess of 10 percent if such acquisition is in the interest of promotion of a safe, sound and stable banking system and fair competition prevailing in the banking system and such party or parties acquiring material interest are fit and proper persons. However, in the case of specialised bank, there is no such legal threshold for share ownership and the Monetary Board is empowered to determine such limits
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Re: Banking Sector
Source
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