[EDITORIALS]LG Group should step inLG Card Co. is still in a crisis. It was forced to end cash advance services to customers for the second time since November. The administration, creditor banks and LG Group are at odds over how to solve the company’s problems. The situation reminds us of basic principles that we must use in coping with a financial crisis.
The administration’s position, at present, is to keep LG Card operating by asking creditor banks and financial companies to extend more credit and letting Korea Development Bank shoulder part of the card company’s financial loss. The government worries that the whole financial system would collapse if LG Card goes into court receivership or bankruptcy.
It is not desirable, however, that the administration takes the attitude of forcing banks to share the burden by threatening them with the collapse of the whole financial system. It means that the government is trying to regulate the activities of economic players because it leans too much on market stability. We do not think financial institutes are so irresponsible as to pursue their individual interests if they see that the market is collapsing. Rather, we think there are big differences between the views of the government and banks about LG Card’s insolvency. It might be difficult for the banks to agree to take part in an effort to save LG Card. It would be a breach of trust with their customers as long as they cannot explain to them fully why their action was inevitable to prevent the collapse of financial markets. If the situation is as serious as the government claims, then the banks should be informed of it so that they can come forward to cooperate with the government. If banks confronted the government because of a lack of information, that in itself is a serious problem.
Although banks belatedly expressed a willingness to give additional credit to LG Card, it must be remembered that the independent management of financial companies that has slowly been taking root here should be preserved.
Creditor banks have decided to give more credit to LG Card, and the LG Group must follow suit. Perhaps the group has no legal requirement to do so, but it must consider how much it earned from LG Card in the past and the damage to the LG brand if LG Card goes bankrupt.