The financial sector constitutes an important part of the infrastructure of the EC's Economy. In Europe, banks play a major role in the financial system with aratio of total assets to GDP of 1.7, compares to 0.84 in the USA, and 2.8 in Japan.
The in...
The financial sector constitutes an important part of the infrastructure of the EC's Economy. In Europe, banks play a major role in the financial system with aratio of total assets to GDP of 1.7, compares to 0.84 in the USA, and 2.8 in Japan.
The institutional organization of financial varies accross member countries in the Community. In general, there are two types of institutional organizations in the Community; universal banking systems and systems in which banking and primary market activities are separate from secondary market activities. The EC member states are accelerating deregulation of their own financial markets for the more competitive post-1992 environments.
An important part of the EC program to complete the internal market is the creation of a unified European financial market. The creation of a unified banking market is based on the principle of a single banking license, mutual recognition and home country control. All credit institutions authorized in one European country will be able to establish or supply financial services with further authorization. The banking model adopted by the EC is the universal banking model and it permits banks to undertake investment banking activities.
The EC reciprocity provisions could lead to the creationof new barriers for non-EC countries. Korean banks which wish to enter the EC financial market after 1992 will have the reciprocity test. For purposes of entry and negotiations, a reciprocity requirement appears, at a minimum, to mean reciprocal national treatment; the criteria also include the concept of effective market access. The EC reciprocity test could become a potential source of pressure for deregulation in the Korean financial market. Progress in external financial liberalization would have implication for the revision of the Korean financial system as well. Korean banks themselves will have to restructure and implement significant changes in their strategies. Such restructuring will have to be supported by modifications in regulatory system and practices.