[Editorial] Finance sector reform

Korea’s financial sector is in sheer disarray. There have been so many serious cases of poor management and corruption recently that public confidence in the nation’s financial system is at rock bottom.

Therefore, when the head of the top financial watchdog called a meeting with the chiefs of the nation’s top commercial banks last week, few saw it as another case of the government’s heavy-handed treatment of the private sector.

Choi Soo-yun, governor of the Financial Supervisory Service, told the bankers that CEOs and auditors will be held accountable for wrongdoings committed by employees and they will face heavier penalties than in the past. He also said the FSS will station its staff at banks vulnerable to irregularities.

Choi and his FSS have good reasons to tighten their grip on the finance sector. The crisis began building up in January with the massive leak of information about tens of millions of customers at three card firms. Similar data leaks spread to the local units of Standard Chartered and Citibank and insurance firms.

These cases showed that much of the personal data kept by the nation’s financial firms were not secure. It is scary that criminals have already begun using leaked information for financial scams and fraud.

Then came the series of fraud and embezzlement cases. A typical illegal loan scandal that involved the Tokyo branches of Kookmin and Woori banks has now spread to two more banks.

What should be noted in the Tokyo cases, in which two bank employees committed suicide, is that they may go beyond the mere practice of some corrupt employees extending illegal loans in return for kickbacks. The suspicion that some of the kickbacks became part of slush funds funneled to top bankers in Seoul must be cleared up.

There are more cases of irregularities involving finance firms, which combined to pull public confidence in the nation’s finance system down to its lowest level. A recent opinion poll found that only 17.6 percent of customers trust the nation’s financial sector.

The situation clearly calls upon the financial firms to do their utmost to remedy problems and the government regulator and watchdog to work out an effective system to monitor the companies.