Revamping the tainted FSS

In a surprising visit to the headquarters of the Financial Supervisory Service yesterday, President Lee Myung-bak lambasted it for negligence in overseeing the operations of the Busan Savings Bank, which has come under fire for a spate of corruption.

Lee went so far as to show senior FSS officials a confessional e-mail he received from a former FSS employee, who wrote, “We have traditionally cared about the jobs we’ll have after our retirement.”

The day before, Prime Minister Kim Hwang-sik joined the derogatory chorus by saying, “We should ask ourselves whether we have been too lenient with private banking institutions that frequently hire former FSS workers.”

No doubt the biggest problem comes from the human factor, because whatever it may be called - surveillance, inspection or investigation - it all loses meaning when a retired FSS employee leaves to join a private banking business after they retire or resign.

In the case of Busan Savings Bank, a hotbed of corruption, the auditors of its four subsidiary banks came from the FSS and were involved in providing illegal loans and committing accounting fraud, instead of detecting malpractice by major shareholders.

As the backlash continued, the FSS came up with reform plans - such as prohibiting retired workers from re-entering financial companies as auditors and refusing banking companies’ requests for recommendations of potential candidates for auditor posts.

Whether such guidelines will work remains to be seen. The FSS has explained that it has not complied with such requests in the past; instead, private companies have called for the FSS’ personnel and expertise in the banking business.

The new FSS governor, Kwon Hyouk-se, has stressed that he will push ahead with a plan to expand the group of employees who are obliged to report the details of their assets, from the current second-class officials to fourth-class ones. That would cover 77 percent of FSS employees. Kwon also promised not to dispatch questionable employees to corruption-prone departments based on evaluations of their honesty and integrity.

However, it is unclear how he plans to evaluate these qualities in his workers. His proposal to give benefits to whistleblowers likely stems from a desperate need to correct rampant incidences of wrongdoing.

The FSS should now be prepared to divorce itself from vice once and for all.