Mega state bank is no answer

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Mega state bank is no answer

Opposition is rising against the motives behind the government’s recent announcement it will try again to sell off Woori Finance Holdings. The state-run Korea Development Bank remains the only potential buyer that can afford the country’s largest banking group.

The government plans to ease bank ownership regulations in an attempt to attract buyers. It is expected to seek a single buyer for Woori Finance Holdings, instead of selling it in smaller pieces.

That would only leave Korea Development Bank, as other major financial groups such as Kookmin, Shinhan and Hana Financial Holdings have already thrown in the towel.

The government is envisioning the creation of a mega-size bank and that is understandable. To sell South Korea’s advanced technologies overseas, we need a super-size financial institution that can raise billions of dollars to fund the projects.

Korea would also be able to compete on an equal footing with international bidders if its technologies were to be coupled with global-scale financing capabilities.

But a bank of such elephantine scale cannot be created by the government from scratch. The financial industry needs a global brand, but if governments interfere, a household name such as Samsung Electronics would never have been built. Banks must endure harsh competition to grow on their own.

What the government can do is concoct a system and environment to strengthen competitiveness as well as groom experts in the field.

It is useless to create a mega-size bank if there is not sufficient manpower to run it. Japan established the world’s largest bank through mergers, but failed to make it a global institution.

It is also wrong for the government to field state-run Korea Development Bank as a candidate to acquire Woori Finance, when the government has always said it wanted to privatize Woori Finance. The government may envision privatizing the merged KDB-Woori, but we have seen from Woori’s case how difficult it is to find a buyer for a multibillion-dollar government stake.

The purpose of selling the government’s stake is to redeem public funds, but Korea Development Bank, strictly speaking, also runs on taxpayer money.

The idea of selling a public entity to another public entity under the grandiose pretext of privatization is just ludicrous.
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