Mixed Signals Just Won't Do

In a Wednesday meeting with the heads of financial institutions, the deputy prime minister for economy, Jin Nyum, let go with a barrage of criticism. He said, "Are the banks not neglecting their role as public organs, being complacent with today's management and paying attention to their own benefits rather than actively seeking customers to lend money to?" Hoping to achieve its policy goal of stabilizing capital markets, the government may feel frustrated when banks drag their feet on offering their cooperation on a series of market stabilization policies. In this respect, it is understandable why Mr. Jin made such a statement, but he should bear in mind that financial firms are not public organs. Treating private firms as public organs is problematic, and the deputy prime minister ends up the focus of discontent.

Even more serious is that, unlike Mr. Jin, Chon Chol-hwan, governor of the central bank, regards banks as "firms trading money" and says, "It is natural that they do not lend money to the firms from which they may not get it back." Different viewpoints are bound to result in different analyses and measures. Lee Keun-young, chairman of the Financial Supervisory Committee, has emphasized the banks' role, saying, "Banks should not give up all the companies that are uncertain to survive." Who is right?

Contradictory messages from high-level officials do not end there. While the head of the central bank hints at a cut in interest rates on loans, the chairman of the Financial Supervisory Committee is proposing something altogether different, saying that the difference between banks' interest rate on loans and that of deposits should be increased further. Lee Ki-ho, senior presidential secretary for economic affairs, said additional bank mergers would happen soon, but Chairman Lee stated that such a prediction was premature. The secretary's hasty statement causes problems, but what is more worrisome is the inconsistencies in remarks made by high-level officials. They are entitled to have their own opinions. When they express their views, however, they should strike a unified front, considering the impact of their words on the economy. That is the rationale behind the creation of the post of the economic deputy prime minister and the economic policy coordination meeting.

Conflicting signals from the government can undermine social discipline. Instead of saying banks are mired in corrupt practices, the government must reflect on its role in exacerbating the situation by sending conflicting signals.