Schwarcz presents research on systemic risk during Korea visit

May 10, 2010Duke Law News

Professor Steven Schwarcz discussed regulating complexity in financial markets, the impact of the global financial crisis on securitization, and the role of systemic risk in the financial crisis during a four-day visit to South Korea earlier this month.

Schwarcz was invited by the Korean government to share his research on the financial crisis during several high-level presentations, seminars and meetings involving the Institute for Research in Finance & Economics at Seoul National University and SNU’s Law School, the Korea Institute of Finance, the Samsung Economic Research Institute, and Hongik University. He also delivered formal Distinguished Public Lectures at the National Assembly of Korea and at the Korean Financial Supervisory Service as well as a Distinguished Guest Lecture at the Industrial Bank of Korea.

During meetings and presentations, Schwarcz discussed the impact of the global financial crisis on Korea. One problem the country faces, he said, is potential international resistance to its plan to create a mega-bank to help the country compete in the global economy. Many now consider large financial institutions, if “too big to fail,” to be more likely to engage in risky projects than smaller organizations.

During his remarks at the National Assembly, Schwarcz argued that no clear evidence of such risky behavior exists, and that recent losses among large financial institutions can be explained largely by other reasons. He cautioned against artificially limiting financial institution size, arguing that size should be governed by the economies of scale and scope needed for institutions to successfully compete domestically and abroad — so long as that size is manageable.

An internationally renowned expert on securitization, international finance, capital markets, and systemic risk, Schwarcz has been a leading voice in analyzing the global financial crisis and proposing ways for preventing future crises. His research on systemic risk has been widely cited by scholars and government and financial analysts.

Duke Law alumnus Sangsoo Jun ’00, consul in the South Korean Consulate Office in Los Angeles, was instrumental in arranging the trip. Schwarcz also met with many other Korean alumni of Duke Law School and Duke University, including Young-Gak (“Ken”) Yun ’88, Chiyong Rim ’96, and Young-Min Kim ’02.

“It was a wonderful opportunity to both share my research on the financial crisis and to gain new insights from the perspectives and experiences of people working at the highest levels of Korean financial industry, government, and academia,” said Schwarcz. “I was particularly impressed by the vibrancy, energy, and intellectual dedication of the Korean people.”