Capital Market Opinion (Ceased)
2014 Jun/17
Population Aging and Financial Development in Korea
June 17, 2014
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- Summary
- Considering the fundamental and abrupt changes taking place in Korea’s economic environment, e.g., aging, and low-growth, the discussions about building a new financial system for the future should incorporate the efficiency aspect. Previously, Korea’s financial system focused on the financing aspect of financial intermediation, in other words, how to effectively mobilize financial resources to finance Korea’s compressed growth. But this aspect is significantly less important under the low-growth, low-rate, and aging trend. Instead, asset management, another aspect of financial intermediation, is of growing importance under the increasing need to improve the management of pension assets, which rapidly rise as lifetime consumption smoothes out. Hence, the paradigm for the future financial system should shift from the financing aspect toward empowering the management aspect of financial intermediation. In this vein, Korea’s financial system for the aging era has two key paths to tread: Asset management that is directly linked to the income replacement ratio and provides the sources of risk capital; and wealth management that enables pension assets to be managed in a customized way.