The Role of Non-Bank Financial Intermediaries in Propagating Korea's Financial Crisis

William Miles
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William Miles: Department of Economics, Wichita State University, 1845 Fairmount, Wichita, KS 67260, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2003, vol. 06, issue 01, 45-64

Abstract: The Korean crisis has been analyzed for the causal role banks played through the "credit view". Non-bank lenders have grown more important than banks in providing loans, but their role in creating financial instability has been ignored. This paper fills this gap, and demonstrates that non-banks were an important source of dislocation. Moreover, these results offer a counter-argument to proposals for "narrow banking". Narrow banking would separate deposit taking and lending into two enterprises, hopefully reducing vulnerability to panics. The poor performance of non-bank lenders evenrelativeto banks in the Korean episode casts doubt on this model.

Keywords: Banking; Credit view; Financial crisis; Narrow banking (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2003
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DOI: 10.1142/S0219091503001006

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