The transformation of South Korea into one of the most advanced economies today required substantial reforms. The main aims of the paper are to explore the impact of regulatory changes on the financial stability and economic development of South Korea, determine the influence of South Korean financial regulation on the development of regulation in neighbouring Asian countries, and to identify the benefits and drawbacks of government-controlled financial systems when compared to market systems. A highly-centralised financial and economic system enabled South Korea’s high economic growth rates, while the innovative liberalisation policies in the 1980s only encouraged the economic growth further. High economic growth rates were accompanied with the growth of systemic risks and sudden development of financial crises. Quick implementation of corrective financial regulatory measures helped lessen the impact of the crises by protecting the local financial and economic system. Besides helping to avoid long-term recessions, the novel approach to liberalisation also served as a guideline to forming financial regulation in neighbouring Asian countries.