Along with commercial banks, capital markets are an integral part of the financial systems in most capitalist economies, and their relative importance is constantly increasing. Countries around the world are making enormous efforts to enhance the competitiveness of their capital markets and investment services industries. Korea is no exception to this trend.
The macroeconomic environment of Korea is changing. First, the main driving force of Korean economic growth is the movement into high-technology-based innovative industries. For example, in 2003 the Korean government selected 10 “new growth-driving industries” including display, next-generation semiconductors, and bio-medicine. Those industries have the characteristics of high risks and high returns, and they require financing with long-term risk capital. Capital markets should be the primary source of risk capital financing because commercial banks, which are directly responsible for the stability of the whole financial system, cannot bear the amount of risk such investments require. Therefore capital market development is an essential task for the sustainable growth of the Korean economy. The rapid aging of the Korean population is another reason why capital markets should be developed. As life spans become longer, efficient intertemporal smoothing of consumption and income is becoming more important for a comfortable life after retirement for every individual. Individuals and households demand capital market products that can meet these needs.