Megabank a megamistake

Home > Opinion > Editorials

print dictionary print

Megabank a megamistake

The government released its plan to merge three state-owned banks, namely the Korea Development Bank, Woori Finance Holdings and the Industrial Bank of Korea. The government’s plan looks good on the surface. But the intention appears suspicious.
If the three banks are combined, their assets will exceed 500 trillion won ($500 billion). This is more than double the assets of each of the top three largest banks in the private sector, Kookmin Bank, Shinhan Bank and Hana Bank. These banks have more than 200 trillion won each. If the plan is implemented, the government will control the financial market. The government says it will foster a mega-sized bank and sell it to the private sector later. But this is easier said than done. The deadline for the sale of Woori Finance Holdings was set by law, but the sale still hasn’t proceeded. It is the same with the Korea Development Bank. The government uses the case of Singapore’s Temasek Holdings as a model. The government tries all kinds of tricks to delay privatization of banks.
One wonders why economic leaders of the administration handle this issue. There hasn’t been a single case in which governments increased the size of banks and made a success of it, in any country around the world. Besides, making a bank bigger isn’t everything. The three government-owned Korean banks nearly went bankrupt during the financial crisis of the late 1990s. When government officials lead banks, there is a greater risk that banks will go bankrupt. The heads of the three state-owned banks used to be government officials from the former ministry of finance and economy. This is why some suspect that the government’s plan for a mega-sized bank is an attempt to disrupt privatization of the banks.
The state-owned banks must be privatized as planned and then they should be left in the market.
Whether they merge or grow is up to the market. Government officials talking about a variety of other scenarios is the same as saying that they won’t privatize the banks. It will only hinder the process of privatization of the banks.
The confusion over the government’s plan for a mega-sized ban confirmed once again.
Thus, the first step to advance the financial market is to remove the old customs of a government-led financial system and employing former senior government officials as heads of public corporations or state-owned banks. The government’s plan to create a mega-sized bank is truly inappropriate.
Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)

What’s Popular Now