Continuous corruption ruins the future of financial business

The domestic banking industry is in serious danger. A serious of corruption and accidents involving banks, insurance companies, securities firms, credit card companies and consumer finance companies break out almost every day. Since December last year, almost 20 financial companies have been detected for loan fraud, insolvent loans, customer information leaks, document fabrication, etc. A crisis of trust within the system has reached a serious level.

The financial business, which deals with customers’ money, requires a relatively high level of confidence, transparency and work ethics compared to other businesses. Since the 1997 Asian financial crisis, a massive amount of public funds has been invested in the banking industry. Nevertheless, the industry has been dependent on easy money such as interest income or commissions, based on a typical “high-paid low-efficient” structure rather than strengthening global competitiveness. Although the industry’s labor productivity has decreased for two consecutive years, 23 percent of employees in commercial banks earn more than 100 million won a year. Being proved through the recent corruption cases, work ethics of the industry people has plummeted and internal control is looser than ever, resulting in a serious moral hazard.

If fraud in the banking industry breaks out, financial institutions involved should be held accountable first. But financial authorities as well cannot avoid the responsibility. The Financial Supervisory Service detected 160 irregularities through its regular or special inspections against the four major financial holding companies last year. However, only 12 of the cases were lightly punished. A reported case of bribery or lavish treatment for the state financial regulator employees by financial institutions is not rare. The back-scratching alliance between the regulator and financial institutions, which is often dubbed as “financial mafia,” has been maintained through the improper appointment of governmental officials as heads of financial institutions, even during the Park Geun-hye administration.

Financial Supervisory Service Governor Choi Soo-hyun said in a meeting with governors of 10 commercial banks Tuesday, “(We) will hold the management and auditor of financial institutions responsible for financial accidents caused by their negligence on internal control.” For such a commitment not to end up being an “one-off event,” they will have to lock the stable door at least after the horse is stolen. Disciplinary actions against Hana Bank President Kim Jong-jun and Hana Financial Group Chairman Kim Seung-yoo, who are responsible for investments in insolvent savings banks, will be determined Wednesday. A change in the financial authorities is strongly needed. Severe disciplinary actions will send a wake-up call to the financial industry. Under the current circumstances, it would be just a day dream to have a “Samsung Electronics” in finance.