The 1997 won crisis and the IMF program

South Korea's chaebol-dominated growth model, built on politically directed bank lending and heavy short-term foreign borrowing, unraveled in 1997 after Hanbo Steel's bankruptcy in January exposed the fragility of highly leveraged conglomerates. As foreign creditors stopped rolling over credit lines, usable reserves fell from about $22.3 billion to just $7.3 billion in a single month, forcing Korea to approach the IMF on November 21, 1997; a $58.3 billion rescue package followed on December 3, tied to financial-sector restructuring and macroeconomic tightening. Bank of Korea Governor Chol-Hwan Chon, addressing foreign correspondents in Seoul in November 1998, described the central bank's monetary response to the ensuing collapse: GDP contracted 6.7% in 1998, consumer spending fell roughly 12% and investment around 40% in the first half of that year alone, and twelve of the country's twenty-four banks were later found not to meet minimum capital-adequacy standards and were closed or merged, reshaping Korean banking for the following decade.