Banking dinosaursThe government’s plan to overhaul state-run banks is nothing but a disappointment. It is far from an overhaul. The plan is a clear sign that the government wants business as usual. It is unbelievable that the year-long effort and research resulted in such a disappointing result. The government offered a lengthy explanation of the plan in order to conceal its real content.
According to the plan, Korea Development Bank is expected to turn over its investment banking operations to its subsidiary, Daewoo Securities Co. The plan that seems to be aimed at downsizing Korea Development Bank actually beefs it up because Daewoo Securities will remain a KDB subsidiary instead of being sold. It means the KDB has simply moved its money and power from one pocket to another. What’s worse, the bank said it would form one new committee to handle the transition of its investment banking unit to Daewoo Securities and another to enhance its policy financing operation, meaning it is beefing itself up instead of restructuring.
Meanwhile, the government said it would pursue a plan to privatize the Industrial Bank of Korea as a “long-term task,” which means the government simply does not want to do it. The Industrial Bank of Korea’s key role was to offer loans to small- and medium-sized companies. But everyone knows that the bank is now competing against private sector commercial banks as it aggressively expands loans to individuals. The government has been looking the other way while state-run banks whose existence is no longer needed compete with the private sector.
The government’s internal audit board urged Korea Development Bank to sell its five subsidiaries, including Daewoo Securities and Korea Development Bank Capital, and ordered all state-run banks to overhaul their operations so they do not overlap with each other. We are amazed the Finance Ministry and state-run banks have flatly refused to do so.
They may be determined to push on in a lame duck session amid a looming presidential election. It may be too much to expect the plan to progress considering the heads of state-run banks are former Finance Ministry officials and their subordinates are the ones who devised the latest plan.
There is no hope as long as deep-rooted relationships and the principle of big government continue to exist. We have to change policy direction to shut down or privatize state-run banks whose existence is no longer needed. Otherwise they will have to pay a hefty price and take future responsibility.