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To improve financial structure of chaebols, government introduced an obligatory debt-equity ratio level. In 1999, companies might not have a debt-equity ratio higher than 200%. Also, government required complete elimination of intragroup transactions in 1998. Provision of “unreasonable assistance to specially related persons or other companies by providing loans, assets and manpower free or at preferential term” was banned and the role of the KFTC(Korea Fair Trade Commission) was reinforced. So KFTC could investigate bank accounts of chaebols’ affiliates. Also, in 2000, ten biggest chaebols were forced to obtain a Board of Directors approval and let public know before large-scale in-group transaction. For the 6th to 30th largest chaebols, they could improve their restructure by workout program sponsored by banks. Banks gave chaebols interest rate reduction, interest expence write-offs and debt-equity swaps. So the debt of chaebols was reduced and chaebols could have incentive for restructure. Also, in order to regulate financial sector, Financial Supervisory Commision and Bank for International Settlements were established. So government forced financial institutions to follow BIS ratio(minimum capital adequacy standard), which many unviable banks came to be closed.

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