Is the Panic of '97 about to come to an end, in the dying days of a year which saw international investors stampede out of the Asia markets? Events in South Korea this week suggest that it is.

During the last six months, as Asia's stock markets and currencies crumbled, the knight riding to the rescue of the beleaguered tiger economies was the International Monetary Fund, which used government-backed finance to bail out Thailand, Indonesia and South Korea, while demanding cruel regimes of financial restructuring.

The IMF interventions did not succeed in stopping the slide in stock prices and local currencies, and debt obligations in US dollars worsened. But what it did do was create the conditions to convince the world's private sector eventually to get back in. This they agreed to do on Monday.

Meetings of commercial bankers in New York, Tokyo, London, and Frankfurt signalled to investors that they were now willing to help the ravaged economy of South Korea, which has seen the won drop 40 per cent in value against the dollar this year and a series of corporate bankruptcies.

Something similar happened during the 1982 Latin American debt crisis when the world's commercial banks followed the IMF's lead and rolled over debt, conducted major refinancing and opened secure trading lines.

The Panic of 1907, which followed the collapse of the Egyptian stock exchange and caused the British pound to fall like the Thai baht today, came to an end when government money was used to stop a run on institutions which were fundamentally sound, while others were allowed to fail. This was banker JP Morgan's idea, and - in a mark of the continuing world influence and power of Wall Street - executives from JP Morgan and Co were at the bankers' meeting in New York on Monday.

The IMF conditions imposed in the panic atmosphere in Asia 90 years on are designed to to achieve something similar - to save the good institutions and allow those which are hopelessly over-leveraged to fall by the wayside, whatever the social cost.

Another important factor in reassuring western bankers that South Korea is serious about restructuring its financial sector has been the public and private commitment made by the president-elect, Kim Dae Jung, that he will not try to stop redundancies as big companies are allowed to go to the wall next year.

Significantly the incoming president told the same thing to the country's unions, which up to now have operated in a system where redundancies are illegal.

The Korean Government must reform its corporate and financial sectors to meet the IMF conditions and attract back international investors. Its National Assembly passed 19 financial reform bills on Monday giving more autonomy to regulators. They created a single, more independent financial watchdog under the prime minister's office and gave the central bank more independence to set monetary policy. Firms will be required to be more transparent in their accounting.

Passage of the bills, previously resisted by the legislators, was a condition for the next stage of the IMF bailout agreement. However the Assembly postponed a measure that would allow banks and financial institutions to dismiss staff, but must pass it by March to meet the IMF conditions.

German banks, the most heavily exposed European institutions in South Korea, headed the charge back in, agreeing to roll over part of an estimated $4 billion (£2.8 billion approx) in short-term loans to South Korea companies for 30 days.

It was the failure of world banks four weeks ago to roll over South Korea's short-term obligations which precipitated the crisis of confidence in the country which boasts the 11th largest economy in the world and now faces a year of zero growth.

Five big Wall Street Securities firms then agreed to participate in "bailout phase two" for South Korea, following the $57 billion rescue package led by the IMF earlier this month.

Japanese and British banks are also among those preparing to extend short-term loans to help South Korea roll over its most urgent debts, as in the words of one banker. "They all realise that they have to get their arms around the problems globally and help the Koreans...To let Korea sink will have huge repercussions on their debt exposure to Korea and also on Korean trade."

A group of leading world commercial banks confirmed in a joint statement after the most important of the bank conferences - in New York - that they were prepared to alleviate a short-term liquidity squeeze in South Korea and to help the country return to global capital markets.

"The institutions attending share the view that the Korean economy is strong and that the present situation is due to a liquidity squeeze primarily caused by an excessive reliance on short-term debt," the statement said.

A German banker was quoted as saying: "There will be no liquidity shortage for 30 days". It was "the right action at the right time", said Richard Johnston, portfolio manager at Offitbank.

"Bringing in the commercial banks and investment banks is an integral part of the strategy. You cannot rely only on multilateral aid."