A Study on the Strategy of Financial Centers to Revitalize the Financial Industry in Korea

Abstract

The Korean government has implemented financial hub strategies in the financial industry development. The purpose of this paper isto identify the major indicators of financial competitiveness, examinesthe currentsituation, and analyzes Korea’s‘financial hub strategy.’ Design/Methodology/Approach - This paper’s main discussions about financial centers focus on evaluating financial center competitiveness, divided into financial development, laws and institutions, human capital, and business environment. According to the Global Financial Competitiveness Index (GFCI), the index system of Z/Yen Group have evaluated the development of the business environment (including tax system and regulation), human capital, infrastructure, market access, and financial sector as the major indicators. We explore a major financial cities using the GFCI rankings over the period of 2006~2020. Findings - This paper found that Seoul had received a lower evaluation (ranking from 41st to 53rd) than its rival cities until 2008, but its competitiveness is rising sharply as it escaped from the financial crisis quickly, and a reformed financial system has been established. It was ranked 6th in 2012, but fell to 36th in 2019, and climbed up to 25th in 2020. Korea’s financial hub strategies’ objectives and directions are ambiguous and the achievements are zigzagging. Compared to the growth of retail and brokerage revenue, advanced financial markets such as asset management and international banking (IB) are slow in developing, and M&A and IPOs are not active. Research Implications - The Korean financial industry’s closed nature in the regulatory and institutional frameworks has hindered its growth into a global financial center. Korea’s financial hub strategies that have been implemented so far need to be reexamined and reestablished.