Crisis of trust

Take stern action against 7 savings banks

The woes surrounding seven troubled savings banks have taken a turn for the worse as customers are suspected of illegally withdrawing deposits just one day before the suspension of their operations early this year. The banks have already sustained irrecoverable damages due to huge losses from bad loans. Now, the withdrawal incident seems to toll a death knell to the moribund.

According to a preliminary probe by the Financial Supervisory Service (FSS), a total of 107.7 billion won ($99.7 million) was illegally withdrawn from the banks hours before their operations were suspended. The standout case occurred at Busan Savings Bank on Feb. 16. Managers and clerks of the bank first took their money back. Then they allegedly called their relatives and VIP customers to ask them to withdraw their deposits ahead of the shutdown.

In short, the employees turned their banks into private safes to defend their own interests at the sacrifice of customers in general. Their acts appear to be in violation of laws related to financial transactions. Some of the bank workers even withdrew huge sums of deposits randomly from their VIP customers, who did not answer phone calls, to help them avoid an asset freeze following the suspension.

Such acts cannot and should not be condoned as they are tantamount to a breach of trust. Commercial banks and other financial companies cannot maintain business without the trust of the public. Regrettably, the shaky saving banks must have forgotten their obligations as the financial services providers, shaking the very foundations of the banking system.

More worrisome is that the incident could not have taken place without collaboration with the financial regulators. The FSS dispatched its officials to the savings banks to carry out the suspension order. But they are suspected of having overlooked the illegal withdrawals. It is no secret that some regulators have forged corrupt ties with not only savings banks but also other financial companies.

The FSS officials should have taken control of the computer networks of the reeling savings banks to prevent illegal withdrawal. Instead, they gave the impression that they helped the banks commit the illegalities. This raises the question whether the nation’s financial regulatory regime is in a normal operation to protect depositors.

The FSS and the prosecution should make every effort to shed light on the incident. Then, the authorities must take stern action against bank employees and regulators who are responsible for the withdrawals. The FSS also has to sincerely implement its decision to retrieve the withdrawn funds.

It is hard to undo the loss of trust and restore prudential regulations in the financial system which was also hit by a hacking attack on Hyundai Capital and the online banking network breakdown of the National Agricultural Cooperative Federation (NACF).