When other people do not believe what you say, it really puts you on edge. When you believe (and know) that something does not exist but circumstantial pieces of information indicate that it may exist, nothing can be more frustrating. The same things also happen between states: country A argues the absence of something while country B argues otherwise, and the listening third person raises the hand of country B. Then the same feeling of frustration sinks in.

Korea knows about this awkward feeling as well. When the stories of Korea and those of foreign governments have clashed, third party decision makers from time to time have sided with the versions presented by foreign counterparts. In particular, this has happened with respect to the nature of the relationship between the government and major banks in Seoul.

The emergency actions taken by the government in the wake of the 1997 financial crisis brought some of the government agencies into the middle of the restructuring process of the country’s financial sector. Since then, the outside perception about the role of the Seoul government, whether rightly or wrongly, still persists even today ― 17 years after the crisis. The relationship has been mentioned by foreign governments and entities on-again, off-again, like a Whac-A-Mole game.

Now, the issue is not just about who to believe ― rather, it is about the sanctions and paying a hefty price as a result of such sanctions. Largely unnoticed, Korea has been one of the countries that has paid and is still paying the price for the perception that financial institutions are under the control of the government. The perception turns into an official “determination” and the determination morphs into the imposition of penalty “sanctions” for the corporations and their products from Korea. Like with everything else, it is difficult to shed a perception. Knowing this, the government has gone the extra mile to ensure that it does not intervene in the financial institutions’ operations other than through what is called “prudential regulations” through its financial watchdog agency.

That said, the developments in the financial market during the past couple of months have been all the more puzzling. Controversies have swirled around the appointments for top positions at major banks. The unconfirmed speculation is that the government’s wishes have been reflected in the selection of high ranking officials of some banks. Of course, any sort of involvement has been flatly denied by government agencies. Here again, it is not just about whose story is true or not; it is about the lingering perception and the perception being solidified by events like this.

As before, the continuing perception or misperception comes with various costs, but these happen to be passed on to someone else. It is not the government or the banks, for that matter, that end up paying for the consequences of this perception or misperception. It is the corporations that conduct transactions with the financial institutions in Korea and participate in trade and business activities in the global market.

These days we are amazed to see how fast people in other countries get detailed information on the developments in the Korean financial market and statements made by government officials. Now, virtually all information is open and reported in real time. Visit any website of the banks and government agencies and all key information is readily available. If someone can read Korean or have someone conduct research in Korean, the webpages provide a tremendous amount of information and material. In this era of hyper-transparency, every action here is being closely monitored and followed by foreign watchers.

Perhaps, these controversies are all stemming from some misunderstandings of coincidental small events here and there. But if someone, at some point, ends up paying the hefty price in foreign markets in the form of various sanctions, it is a completely different story.

By Lee Jae-min 

Lee Jae-min is an associate professor of law at Seoul National University. ― Ed.