BANKING REFORM IN ASIA: A PROGRESS REPORT

Authors


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    This article consists of edited sections from an extensive survey published and edited by the author in July 1999 entitled “A Survey of Banking Reform in Asia” and an additional report entitled “Banking Reform in Asia” in the August 1999 issue of the Asian Financial Outlook. Both these reports, as well as the monthly Asian Financial Outlook, are available in Adobe PDF file format directly from the author: andrew.freris@bankofamerica.com.

    The reports as the they appear here have not been updated and reflect the situation as it was at the end of July 1999. Further updates will appear in the Asian Financial Outlook as necessary.

    The author wishes to acknowledge the invaluable help of Daisy Shum, Economics and Statistics Associate, and Ivy Li, Research Assistant, both of Asia Research in Hong Kong.

Abstract

This article surveys and quantifies the progress made by five Asian economies during the period 1997–1999 in the reform and restructuring of their banking systems, paying particular attention to the very different circumstances and policy solutions in each of them. It develops a simple and objective scoring system of the progress achieved—one that puts South Korea at the top, Japan and Malaysia in the middle, and Thailand and Indonesia at the bottom. The relative success achieved in South Korea and Malaysia is attributed in part to their establishment of “Asset Management Corporations,” bodies charged with buying non-performing loans, managing (and in some cases restructuring) the assets underlying the loans, and eventually reselling the loans. This practice has allowed for a more direct approach to corporate restructuring.

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