• KDI Journal of Economic Policy
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• v.14 no.2
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• pp.109-153
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• 1992

This paper estimates a translog cost function for the Korea's banking industry and derives various implications on the prospect for the Korean banking structure in the future based on the estimated efficiency indicators for the banking sector. The Korean banking industry is permitted to operate trust business to the full extent and the security business to a limited extent, while it is formally subjected to the strict, specialized banking system. Security underwriting and investment businesses are allowed in a very limited extent only for stocks and bonds of maturity longer than three year and only up to 100 percent of the bank paid-in capital. Until the end of 1991, the ceiling was only up to 25 percent of the total balance of the demand deposits. However, they are prohibited from the security brokerage business. While the in-house integration of security businesses with the traditional business of deposit and commercial lending is restrictively regulated as such, Korean banks can enter the security business by establishing subsidiaries in the industry. This paper, therefore, estimates the efficiency indicators as well as the cost functions, identifying the in-house integrated trust business and security investment business as important banking activities, for various cases where both the production and the intermediation function approaches in modelling the financial intermediaries are separately applied, and the banking businesses of deposit, lending and security investment as one group and the trust businesses as another group are separately and integrally analyzed. The estimation results of the efficiency indicators for various cases are summarized in Table 1 and Table 2. First, security businesses exhibit economies of scale but also economies of scope with traditional banking activities, which implies that in-house integration of the banking and security businesses may not be a nonoptimal banking structure. Therefore, this result further implies that the transformation of Korea's banking system from the current, specialized system to the universal banking system will not impede the improvement of the banking industry's efficiency. Second, the lending businesses turn out to be subjected to diseconomies of scale, while exhibiting unclear evidence for economies of scope. In sum, it implies potential efficiency gain of the continued in-house integration of the lending activity. Third, the continued integration of the trust businesses seems to contribute to improving the efficiency of the banking businesses, since the trust businesses exhibit economies of scope. Fourth, deposit services and fee-based activities, such as foreign exchange and credit card businesses, exhibit economies of scale but constant returns to scope, which implies, the possibility of separating those businesses from other banking and trust activities. The recent trend of the credit card business being operated separately from other banking activities by an independent identity in Korea as well as in the global banking market seems to be consistent with this finding. Then, how can the possibility of separating deposit services from the remaining activities be interpreted? If one insists a strict definition of commercial banking that is confined to deposit and commercial lending activities, separating the deposit service will suggest a resolution or a disappearance of banking, itself. Recently, however, there has been a suggestion that separating banks' deposit and lending activities by allowing a depository institution which specialize in deposit taking and investing deposit fund only in the safest securities such as government securities to administer the deposit activity will alleviate the risk of a bank run. This method, in turn, will help improve the safety of the payment system (Robert E. Litan, What should Banks Do? Washington, D.C., The Brookings Institution, 1987). In this context, the possibility of separating the deposit activity will imply that a new type of depository institution will arise naturally without contradicting the efficiency of the banking businesses, as the size of the banking market grows in the future. Moreover, it is also interesting to see additional evidences confirming this statement that deposit taking and security business are cost complementarity but deposit taking and lending businesses are cost substitute (see Table 2 for cost complementarity relationship in Korea's banking industry). Finally, it has been observed that the Korea's banking industry is lacking in the characteristics of natural monopoly. Therefore, it may not be optimal to encourage the merger and acquisition in the banking industry only for the purpose of improving the efficiency.

• THE INTERNATIONAL COMMERCE & LAW REVIEW
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• v.57
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• pp.199-219
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• 2013

The objective of this study is to find out whether Korean main banks may have efficiency against Indian major banks. For this purpose, DEA analysis is used for checking relative efficiency levels. The study proposes, as a result, Shinhan bank, Woori bank and Kookmin bank in Korea may consider entering into Indian banking industry because these three banks have relative efficiency against main Indian banks like Yes bank, ICICI bank. The results of the study comply with actual facts since Shinhan bank already came to Indian banking market at first. Shinhan bank have three branches like Mumbai, NewDelhi etc. Wooribank also entered into India in 2012 as second case among Korean banks. But Kookmin bank did not come to India yet so they should consider coming to India. As a preliminary measures, they can send one person as a expatriate to survey the Indian banking industry like KDB in Korea. If they can utilize their core competence in real estate field at India, they may positively think about entering into India as quickly as possible. Although many Korean firms have penetrated into Indian market recently, they almost belong to manufacturing sectors so Korean service firms like banks should consider more coming to India because the most hot sector for FDI in India remain service sector and many foreign service firms already rush to Indian market. If Korean service firms like banks delay FDI further, good market opportunities would not be there any more. DEA analysis can be one of tools to check investment feasibilities. Since India becomes a compulsory subject for most of Korean firms, to increase possibilities of success in India, such Korean banks may consider applying fast-mover investment strategies to the Indian business fields.

• Journal of the Korean Operations Research and Management Science Society
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• v.37 no.3
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• pp.1-12
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• 2012

The research mainstream has focused on improving the competitiveness throughout the reinforcement of customer satisfaction and loyalty in the banking industry, but there is still a lack of research that reflects characteristics of banking services. From a customer point of view, this study considers a variety of bank characteristics such as levels of interest rate, numbers of transaction banks, monthly average balance, and age. In line with this observation, the main objective of the current research is to investigate the relationship between bank characteristics and ongoing transaction intentions with a particular bank using a categorial regression analysis and in turn, provide insights for managers. First, the findings show that deposit interest rate is insignificant for leading customers to ongoing transaction intentions, but loan interest rate is significant when customers are satisfied with a loan interest rate. Second, if customers only transact their banking services with a particular bank, they are more likely to deal with the bank, rather than customers who transact additional one or two banks. Third, in the case of monthly average balance, customers who have more than \100 million wons per month are likely to switch other competitors. Finally, old customers are more stable than young customers when they consider to switch the relationship with a bank. The author provides insights for bank managers and discusses research limitations and further directions of the study.

• THE INTERNATIONAL COMMERCE & LAW REVIEW
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• v.33
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• pp.63-89
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• 2007

The UCP is an authoritative compilation of the customs and practice of letters of credit observed by most of the participants in the transaction. It remains the most successful set of private rules for trade ever developed. First issued in 1933, the UCP has been through five revisions, the latest being the present UCP 500, which came into force in 1994. Since 1994, new developments in transport, insurance, electronic commerce and banking industry have spurred the current revision of the rules. The ICC Banking Commission approved UCP 600 on October 25, 2006 by a unanimous vote of 91 to 0. The revision, which will come into effect on July 1, 2007, incorporates a number of changes from UCP 500 as follows : UCP 600 has a leaner set of rules, with 39 articles rather than 49 articles of UCP 500; New sections on "definitions" and "interpretations" have been added to clarify the meaning of ambiguous terms; The phrase "reasonable time" for acceptance or refusal of documents has been replaced by a firm period of five banking days; UCP 600 allows for the discounting of deferred payment credits. However, UCP 600 has two main problems such as the inconsistency with insurance industry and the banking community-oriented rules. We have some months before the commencement of UCP 600. From today to the commencement of UCP 600, we should study the full contents of UCP 600 and the influences on the trade industry.

• International Journal of Fuzzy Logic and Intelligent Systems
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• v.11 no.4
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• pp.229-237
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• 2011

As smart phones have become widely adopted, they have brought about changes in individual lifestyles, as well as significant changes in the industry. As the mobile technology of smart phones has become associated with all areas of industry, it is not only accelerating innovation in other industries such as shopping, healthcare service, education, and finance, but is also creating new markets and business opportunities. The preparation of thorough security measures for smart phones is increasing in demand. While offering excellent mobility and convenience, smart phones can be exposed to a range of violation threats. In particular, it is necessary to make efforts to develop a security system that can preemptively cope with potential security threats in the banking service area, which requires a high level of reliability. This paper suggests a security reference model that is considered for the smart phone-based joint mobile banking development project being undertaken by the Bank of Korea in 2010. The purpose of this study is to make a security reference model for a reliable smart phone-based mobile financial service, by recognizing the specific security threats directed toward smart phones, and providing countermeasures to these security threats. The proposed mobile banking security reference model is useful in improving system security by systematically analyzing information security threats to the mobile financial service, and by presenting the guideline for the preparation of countermeasures.

• Journal of Korean Society for Quality Management
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• v.32 no.3
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• pp.153-165
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• 2004

Recently, financial service industry of Korea started to pay attention to private banking targeting to the rich. However, as the advanced foreign competitors have entered the market, strategic approaches are needed focusing on the general rich rather than the exceptional VIPs. In this paper, we use QFD to provide marketing strategies for Korean financial service providers. Our finding is that ‘intangible service provided by private banker’ and ‘off-line sales’ have marketing priority and ‘investment management’ and ‘value-added service’ follow.

• Journal of the Korean Operations Research and Management Science Society
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• v.41 no.1
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• pp.71-85
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• 2016

Service channel environments have changed dramatically with the advent of new, online digital channels. This article studies the effects of perceived multi-channel service quality on customer satisfaction and loyalty in the banking industry and the moderating role of age, which is a characteristic of customers. The objective is to identify the quality factors that affect the overall satisfaction and loyalty of a multi-channel customer. A quantitative study was conducted on 900 customers, with the main targets being users of the nine primary Korean retail banks. Results show that perceived service quality of the physical environment, human service, Internet banking, mobile banking, and ATM has a positive influence on overall satisfaction and loyalty. Age moderates the relationship among physical environment quality, human service, and customer loyalty.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.17 no.1
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• pp.225-233
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• 2016

This study examined how the level of competition in the banking industry affects the risk-seeking tendency of individual banks. In earlier studies, the NPL ratio was used as an indicator of the risk-seeking tendency, but this ratio has limits because it is an ex post indicator of the risk. Therefore, the asset risk was chosen as a new indicator of the risk-seeking tendency, which is an ex ante measure of the risk, and the data were analyzed. The results suggested that there is a negative correlation between the level of competition of the banking industry and the risk-seeking tendency. Interestingly, opposite results were obtained when the NPL ratio was applied as an indicator of risk-seeking tendency. Therefore, the correlation between the level of competition in the banking industry and the risk-seeking tendency depends on the indicator of the risk-seeking tendency. This means choosing the appropriate indicator is the key component leading to precise results. The asset risk is more consistent with the concept of risk-seeking tendency than the NPL ratio, and it is a more appropriate indicator considering that the asset risk is a relatively less affected indicator other than risk-seeking tendencies.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.7
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• pp.343-348
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• 2020

So far, research into multinational bank' overseas expansion has focused on foreign direct investment in the financial services industry. However, this study focused its existing theories on multinational banks on decision-making related to the type of overseas advancement of local financial institutions. For research, four environmental factors were considered: the scale of foreign direct investment, the scope of financial services that can be provided according to the rules of the host country, the corporate tax rate of the host country, and the level of development of the host country's banking industry. Through Kotra, data on the total amount of claims from 2010 to 2014 and the regulatory status for the country's financial industries were obtained. Hypothesis are built around theories and survey factors and has been demonstrated through regression analysis. Results show that Korean financial institutions tend to expand as legally independent subsidiaries where the corporate tax rate of the host country is relatively low. Contrary to the previous studies based on the U.S. banking corporates, results show that Korean banks tend to expand in forms of branches to the host countries with high level of banking system development.

• Asia Marketing Journal
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• v.15 no.1
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• pp.23-42
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• 2013

To overcome the profitability challenge these days, many global banks are increasingly focusing on cost efficiency through more efficient banking processes, such as online and mobile banking, whereas a number of other banks choose to differentiate their services for retaining and attracting the most valuable customer segment (Deloitte, 2011). While global banks in the retail banking industry are adopting either of these two business models as a strategic choice for their long-term growth, KB Kookmin Bank, one of the leading retail banks in South Korea, has begun to operate 'KB Rockstar' as a strategic channel, particularly designed to target college students in the youth market. The new marketing strategy has resulted in a positive impact on its brand image in customers' perception as well as a drastic increase in the number of youth customers. In this study, we analyze the case of 'KB Rockstar' and summarize the key factors for its success from a marketing perspective. First, 'KB Rockstar' is not simply a good channel strategy, but an innovative marketing strategy that aligns place, product and promotion together in order to create a synergy effect, resulting in the successful implementation of the bank's targeting strategy. Second, the strategy effectively establishes 'KB Rockstar' as a brand targeted to youth customers while also competently strengthening the image of the corporate brand, KB Kookmin Bank. The skillful implementation of organically combined marketing mix strategies has enabled the successful launch of the bank's sub-brand. Third, the strategy considers a retail bank branch as not only the place that makes sales transactions in order to generate short-term profits, but also the place that builds a long-term relationship with customers in order to maximize their lifetime values in the long run.