[Editorial] Return of the ‘Mofia’

Cheong Wa Dae has recently told the Cabinet ministries to temporarily halt the process of screening candidates for the top posts of the public institutions affiliated with them.

What prompted the Presidential Office to stop the process was a growing outcry against former Finance Ministry officials taking top jobs at private and public financial institutions.

Former officials of the Ministry of Finance are called “Mofia” here for their mob-like cronyism.

The latest examples include Lim Young-rok, a former vice finance minister who has been nominated to head KB Financial Group, and Yim Jong-yong, another former vice finance minister who has been named the chairman of Nonghyup Financial Group.

Earlier this month, Kim Keun-soo, a former director general of the Finance Ministry, was named to lead the Credit Finance Association of Korea, while Kim Ik-joo, another Finance Ministry official, was appointed as the president of the Korea Center for International Finance.

As criticism mounts over the Mofia’s growing presence in the financial sector, incumbent economic officials came forward to defend them, revealing the deeply entrenched web of cronyism among financial officials.

Shin Je-yoon, chairman of the Financial Services Commission, asserted that “government officials can also make good bankers.” Finance Minister Hyun Oh-seok said picking the right people was more important than fussing over their backgrounds.

Yet the Mofia’s growing prominence has led to concerns about increased government control of the financial industry. While the top economic officials dismissed these concerns as groundless, the recent resignation of the chairman of BS Financial Group showed they were not.

On June 11, Lee Jang-ho abruptly announced his resignation, although he still had nine months left on his term. He had led the Busan-based private financial group for the past eight years.

Behind Lee’s sudden departure was pressure from the Financial Supervisory Service. A week earlier, the regulator released the results of its inspection of the group and its flagship, Busan Bank.

It pointed out a laundry list of problems with the group, which ranged from the bank’s management of some 100 accounts under false names to illegal searches of customer information by bank employees for personal purposes.

In an unusual move, an FSS deputy president called on Lee to advise him to voluntarily resign from his post.

The regulator’s intervention was totally unwarranted, given that the government did not own even a single share in the private financial company. Yet the FSS asserted it was a legitimate regulatory measure intended to protect the group from potential risks stemming from its CEO.

The recent parachute appointments of Mofia members amplified concerns about government interference.

This led Cheong Wa Dae to review the process of picking new heads for public institutions. Currently, each institution has a candidate recommendation committee. But these committees simply recommend the candidates who have already been picked by each ministry. They should be allowed to play a more substantial role.

In the financial sector, the government should keep the Mofia in check. Otherwise, cronyism among former and incumbent financial officials will ruin the domestic financial industry.

The government should use talented experts in the private sector and push financial institutions to develop innovative services geared toward small and medium-sized enterprises and venture companies, the main engines of growth in a creative economy envisaged by President Park Geun-hye.