[EDITORIALS]Lower the barriers

Following remarks by the head of Korea’s central bank that the principle of separating the financial industry and industrial capital should be reviewed, heads of Korea’s major commercial banks said that allowing the entry of industrial capital into the financial sector is not fearful prospect.
Experts agreed that it is time to break the old-fashioned chains. The government and the ruling party’s assertion that there would be no change in the old system of preventing industrial conglomerates from entering the financial sector is not reasonable. The government limited domestic industrial capital from holding more than 4 percent of a bank’s shares when it privatized banks in 1982.
That succeeded in preventing family-owned conglomerates from monopolizing capital markets. It also contributed to improving corporate transparency. But the world has changed. Worries that major manufacturers with overflowing cash reserves would gobble up all of the capital in the financial market have vanished. On the contrary, the system has become an obstacle that prevents Korean financial institutions from competing with foreign speculative capital in our financial markets.
There is no other nation that has strictly held on to a system that prevents industrial capital from entering the financial market. Even the United States only draws a line between banking and industrial capital. For example, the revenue of GE Capital, the non-banking financial arm of General Electric, accounts for 44 percent of General Electric’s total revenue. Korean industrial capital, however, is not allowed to make efficient investments. If this system continues, Woori Bank, which will be put up for sale next year, will be handed over to foreign investors.
The financial watchdog’s defense of the old system shows its incompetence. The fear of seeing banks turned into personal coffers could be allayed by proper surveillance, which is the financial regulators’ role. Separating industrial capital from the financial sector is a relic of when market principles did not rule here. Today conglomerate governance structures have improved dramatically, and there is, if anything, too much transparency.
A distorted situation where the manufacturing sector worries about overflowing cash reserves while financial companies are sold to foreign investors at dirt-cheap prices is continuing. The old system should be abolished as soon as possible, to allow the efficient use of our limited resources.