Is Kim going too far?
By Kim Tae-gyu
In less than two months after Financial Services Commission (FSC) Chairman Kim Seok-dong took charge of the top financial regulator, more than 10 percent of the country’s savings banks have made the headlines.
Up to 11 savings banks out of the total 105 were foremost on the mind of the 57-year-old _ operation of three have been suspended, another three are under close scrutiny and five more are on an alert list.
Then, the question of whether Kim is going too far springs up. If that is the case, why does he adopt such a cold-turkey strategy, which might end up generating a bank run disaster? Can’t he embrace gradualism?
One plausible answer to the question is that he takes a ``big-bath’’ approach.
In other words, no matter what problems he deals with during his early days in the chairmanship these might be attributable to his predecessors.
Simply put, Kim does not have to take responsibility for any of the troubles that he inherited. He can put his fingers on erstwhile FSC heads to deal with the problems and instead he is the trouble-shooter.
Hence, Kim’s maneuver might be branded as a massive one-time-write-off maneuver to rectify the past wrongdoings, which would vindicate him at the expense of his precursors and possibly the customers of savings banks.
Such suspicions seem to be very natural but this reporter does not buy into them in consideration of the track record of the life-time bureaucrat who, in my view, has demonstrated the noble spirit of putting national interests first.
Kim appears to have a strong belief deep inside himself that the government has to promptly step up in case the private sector creates structural drawbacks when it fails to grapple with itself.
Getting aboard the Seoul administration in 1980, he was the man who was entrusted with fighting against the aftermath of the real-name financial transactions system, which was introduced in 1993.
He also took the initiative in settling the mini-crisis in 2003 caused by the increasing credit card delinquents and the sale of Korea Exchange Bank to Loan Star Funds although the latter resulted in great controversies.
In all the cases, this reporter thinks that Kim sincerely strived to put top priority on national interests rather than personal benefits even though I am not sure whether all of the attempts evolved just as he had intended.
He left the government with incumbent President Lee Myung-bak taking the oath in 2008, but returned to the FSC last month when he made no secret of his strong will that the FSC will by no means sit idle when the markets go astray.
The unhealthy financial status of savings banks have been widely recognized but the previous regulators did not take any drastic steps. In contrast, Kim did so as soon as he took the leadership.
I think that Kim is the right guy to solve such problems as ongoing flagging savings banks. His follow-up of announcing an approval of the status of the remaining 94 savings banks is gaining applause.
Subsequently, I think that the way that Kim handled the ailing savings banks are more about his style rather than a ``big-bath’’ approach and thus far it appears to be suitable.
Yet, doubts still linger. Some cast suspicious eyes on his philosophy of intervention, which they claim interferes with the self-regulating power of the markets.
It is a high time for Kim to prove that he is able to find a happy medium between market principles and intervention of the regulator. Then, many doubts will evaporate not only about his big-bath approach but also his interventionism.