Market forces set to shape Korean banking sector

The banking deal between the unions and the Korean government is an unlikely victory for market forces.

The deal that was hammered out between the South Korean government and the banking unions on Tuesday night is incontrovertibly a victory for the government, the banks and by extension their shareholders. The success of the deal appears to hinge on one big misconception by the unions on the role of the government.

The unions strived to get the government out of management, presumably because they thought the government would either force layoffs or direct policy lending. Yet the government has said all along that it does not want to be involved in the day-to-day running of any bank û- even if it is the major shareholder. While it has been at...

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