ed Picking bank presidents
Top financial jobs should never be political trophies
The financial sector of South Korea, the world’s 15th-largest economy, has long remained notoriously backward.
In the World Economic Forum’s ranking of financial competitiveness, the nation is ranked 80th among 144 countries, just one notch higher than Uganda. Little wonder that Korean banks’ return on assets (ROA) are among the lowest even in Asia. The nation has none of the world’s top-100 banks and the index of popular trust in the financial industry is 61.3, barely above failing grade.
What’s been happening in Woori Bank, one of the four largest commercial banking institutions here, in the past couple of weeks tells part of the story.
Woori Bank’s president, Lee Soon-woo, has done pretty well over the past three years by shaking off toxic assets and raising profitability, and thought he could serve for another term. That was, until the government, Woori’s largest shareholder, told him it has another person in mind ― an alumnus of Sogang University, President Park Geun-hye’s alma mater.
On Tuesday, a committee to recommend the bank’s president announced three candidates for the top job, including Lee Kwang-goo, a Sogang graduate and the bank’s vice president. Woori’s board of directors will pick one of them next Tuesday, but few insiders doubt Lee’s selection.
The graduates of Sogang have recently swept the top posts of various financial institutions, including the Korea Development Bank, the Export-Import Bank of Korea, KDB-Daewoo Securities Co., and Koscom, a securities computerization agency. They are members of Sogeumhoe (Sogang Financial Society), a gathering of financial executives who graduated Sogang University. It was set up in 2007 to support President Park, who was defeated then by Lee Myung-bak in her party’s presidential primary.
During Lee’s tenure, the graduates of his alma mater, Korea University, took top jobs at three of the four largest banks, and the remaining one bank was also run by one of Lee’s confidants. Would anyone with common sense expect the development of financial industry in a country where major banks’ presidencies are given as little more than political trophies? Can President Park criticize her predecessor while she is doing exactly the same thing?
Park lashed out at the "Mofia” ― former Ministry of Finance (MoF) officials who grabbed key financial jobs ― but some of her (virtual) appointees do not even have experience in the financial world. Few would be surprised if the nation’s financial competitiveness falls even further while Park is in office.
Korean banks have been ``ownerless” since the days of Park’s father, who used the large lenders as cash pipelines to selected industries and businesses. The massive bailout of banks since the 1997 Asian financial crisis has only firmed up the government’s grip on them. Financial authorities stick to the separation of financing and industry, saying they cannot let banks fall into the hands of the chaebol. Such concern may not be entirely unwarranted but cannot be a reason, either, for continuing government-dictated banking.
The government should start with at least guaranteeing transparent and independent operation of the banks, including the selection of their heads. Koreans will know about the incumbent administration’s intention next Tuesday.