What Can We Learn from Post-Crisis Bank Restructuring in Malaysia and Korea?

The paper compares the Malaysia's and South Korea's efforts to restore financial stability and to restructure the banking system since the onset of the financial crisis in July 1997. Bank reform and restructuring have been undertaken to address weaknesses in the sector that had rendered them vulnerable following huge currency depreciation sparked by sudden and massive international capital outflows. As a consequence of its reduced exposure to private bank borrowings from abroad, Malaysia was not in a situation of having to go cap in hand to the International Monetary Fund (IMF) or to others for emergency international credit facilities. Unlike South Korea, where state capacities were often undermined by neo-liberal reforms and policy conditionalities imposed by the IMF, Malaysia enjoyed the freedom to prescribe its own recovery plans, hence avoiding some of the problems associated with the IMF rescue packages. This has motivated the paper to examine what lessons can be drawn from Malaysia's and South Korea's experience with bank restructuring in the wake of the 1997 financial crisis. Most importantly, the preceding study of the circumstances prior to the introduction of the bank restructuring measures as well as the specific nature of the measures and their apparent consequences suggest caution in making gross generalizations. Instead, their different experience urges greater attention to context and detail. [ABSTRACT FROM AUTHOR]