This study investigates the financial regulatory and supervisory system of Korea`s Merchant Banking
Corporations before the 1997 currency crisis, which is regarded to have played a pivotal role in the
deterioration of the country`s financial system. The results of this study show that even with the
diversified supervision system, the consolidation function of financial supervision among supervisory
bodies of Korea`s Merchant Banking Corporations had proven to have been extremely weak, leaving
many gray areas of supervision. It argues that the unconsolidated supervision and outdated prudential
regulations coupled with loose supervision appear to have been a major factor that led to the
deterioration of the management of Korea`s Merchant Banking Corporations, thereby causing
vulnerability in Korea`s overall financial system especially prior to the outbreak of the currency crisis.
Key Words: Merchant Banking Corporation, Currency Crisis, Financial Regulation,
Financial Supervision
JEL; F3, G2
