Financial regulatory reform in South Korea then and now

International best practices for financial regulation emphasize the significance of regulatory independence for prudential regulation and effective coordination for resolution of problems in financial system. These two, though not mutually exclusive, have been at odds with each other in the Korean context where coordination takes place not among equals but with top executives having the clear upper hand. This paper takes a closer look at South Korea's financial regulatory reforms since the 1997 crisis and argues that South Korea's financial regulation had oscillated between these two goals and the balance between regulatory independence and effective coordination had been tipped in the favor of the latter. The analysis shows that despite the initial pledge to regulatory independence and departure from the past practices, regulatory independence has been frequently compromised, leading to a reversal to old practices: strong political and bureaucratic influence on financial regulation.