The Financial Supervisory Service will soon announce disciplinary decisions on nine financial firms and their executives and staff, whose number is said to be more than 200. Officials say those who face sanctions include about 10 former and incumbent CEOs and altogether about 50 people are likely to receive severe punishments such as dismissals and suspensions of duties.
These impending mass disciplinary actions, whose scale is unprecedented, prove that the nation’s financial sector faces many problems.
Recently, Korean financial firms have been dogged by a spate of irregularities, misdeeds, mismanagement and corruption scandals, causing huge losses to customers and a crisis in public confidence in the nation’s financial system.
The crisis started in January, with the data theft at Kookmin, NH Nonghyup and Lotte card firms, from which 140 million sets of personal information were stolen. There were similar cases of mishandling of consumer data and information at commercial banks.
Then comes the KB Financial Group, where an assortment of irregularities were exposed. The most recent case targeted by the FSS is the internal power struggle between the chairman of its holding company and the head of its flagship firm, KB Bank, who clashed over changes to the bank’s online banking system. Before that, the Kookmin Bank was implicated in embezzlement, loan document forgery and an illegal loan scandal involving the bank’s Tokyo branch.
Judging from these cases, the financial firms deserve punishment and they should strive to put their houses in order. But at the same time, authorities, including the FSS, cannot avoid their own responsibility.
Korea is notorious for its financial sector regulations, but the recent cases show the administrative red tape was not effective in curbing irregularities involving financial firms. The cases prove that officials from the FSS, the top watchdog, and other government agencies were idle in regulating financial firms.
No wonder the chief auditors at the three credit card companies that face harsh punishment for the largest-ever data theft case were former senior FSS officials. Revolving-door appointments and collusive links foster ineffective regulation and unhealthy operation of financial firms.