&#91EDITORIALS&#93The politics of selling a bank

The sale of Chohung Bank seems to be reeling under the influence of politics. The Blue House has decided to hold a closed-door discussion on the issue, as was demanded by the bank’s labor union. The Blue House intervention was foreshadowed by a meeting between the president-elect and union leaders before President Roh Moo-hyun’s inauguration. It thus appears that hidden reasons underlie the Blue House bid to try to settle the issue abnormally, even by violating principles.
The sale of Chohung Bank has been part of the effort to restructure financial institutions that the Kim Dae-jung government pursued after the 1997 foreign exchange crisis. Officials in the new government, however, seem to see it as a labor issue, not an economic one. Otherwise, there is no reason for the Blue House to deal with the union directly, shouldering aside government offices responsible for restructuring financial institutions. When the Blue House handles an issue directly, as it did in the truck drivers’ strike, it is rather a political settlement than an economic solution. The Blue House says that the union must be persuaded not to strike, but that should be seen to by the responsible government office.
Shinhan Financial Group was chosen as the preferred bidder for the sale of Chohung in January, and negotiations went on for more than four months. Since the Blue House came forward, the already-slow negotiation has virtually stopped. In financial circles, it is rumored that the deal will be stalled for a prolonged time, or even scrapped.
The union claims that the bank has a strong potential to survive on its own, but normalization is at best a remote prospect. Chohung’s sale must follow economic logic. As overseas investors participated in the bidding, they also will watch the sale procedure. If it is handled without principles, Korea’s will to restructure its financial institutions will be suspect.
Political interventions into economic issues so far have all brought further trouble rather than solutions. The privatization of banks is promoted by the Public Fund Management Committee. Let the legislative organ decide the sale of Chohung Bank.