[Herald Interview] ‘Tighter rules needed before Woori sale’

Bancorp CEO says new rules would be desirable for megabanks in Korea


Betsy Cohen, founder and CEO of U.S. internet retail bank Bancorp Inc., said tightening capital and liquidity rules should come before the creation of the megabank due to be formed by the privatization of Woori Financial Holdings.

“Size is not protected easily. Activities of large institutions carry a great deal of risk for a wider number of people so bigger banks need to be subject to higher capital requirement,” Cohen told The Korea Herald on Wednesday.

While visiting Seoul to attend an event hosted by the Asia Society, a New York-based network promoting Asian culture, Cohen said that the success of the sale of a state-owned institution depended on the regulatory environment.

“Due to safety issues, the success of larger institutions relates to requirement on their operations such as proprietary trading. Making a new set of rules would be desirable for megabanks here,” the banker with more than 30 years of experience said.

The Asia Society held a celebration of the third anniversary of its Korea Center in Seoul on the same day.

Meanwhile, the government announced a fresh road map for the sale of Woori Tuesday, resuming the process of privatizing the biggest financial institution by assets, stalled since last year.

The Korea Deposit Insurance Corp., the deposit insurer handling the sale, will accept letters of intent to bid for the stake by June 29 and select a preferred bidder by September.

Creating a megabank to rival global players has been the centerpiece of Lee Myung-bak administration’s plan to transform the industry into a regional hub. The plan is also to recoup more than 14 trillion won ($12.8 billion) of public capital used to create the lender in 2001. Woori was the nation’s first financial holding company after the 1997 Asian Financial Crisis.

The ambitious plan runs against the behavior pattern of most advanced countries after the U.S. government had to rescue banks regarded as too-big-to-fail during the financial crisis of 2008-9.

Cohen also argued the Korean government needed to build a stronger financial safety net to serve people with lesser credit ratings.

“Expanding the partial guarantees on small business loans would be one option, and I think it is a very appropriate mechanism without owning the banks,” she said.

Eight savings banks in the country’s secondary banking sector were suspended this year after their balance sheet failed to meet capital requirements set by the regulator. The KDIC currently guarantees up to 50 million won of savings per depositor.

By Cynthia J. Kim (cynthiak@heraldcorp.com)