Restoring government credibility

The corruption scandal involving Busan Savings Bank Group is threatening to trigger a major political controversy. Eun Jin-su, a former commissioner of the Board of Audit and Inspection, was summoned by the Supreme Prosecutors’ Office on suspicion of taking bribes in exchange for covering up financial irregularities at the bank last year.

Whistle-blowers claim he may not be the only one at the government watchdog. Prime Minister Kim Hwang-sik, then chairman of the BAI, told senior reporters in February that the board had received a lot of external pressure when the agency launched an investigation into rampant corruption at savings banks early last year.

The prime minister spearheaded a four-month investigation into five savings banks until April 2010 and uncovered problem loans worth 2.6 trillion won ($2.4 billion). He reported the results to the president in May.

Kim had said financial authorities are accountable for malpractices at the savings banks and that these troubles had been simmering for a long time.

Poor management and the resultant insolvency at savings banks have worsened since the Kim Dae-jung administration and yet authorities neglected to address the problems. But it is important to ask why they let the problems grow. We can only suspect that shady deals and dirty money might have been involved in the process.

The corruption scam won’t likely end with the prosecution of Eun. He served as chief legal advisor to Busan Savings Bank in 2005, but nevertheless took part in auditing the savings bank industry despite government regulations that prohibit such a practice.

The case underscores the operational slackness at the Board of Audit and Inspection. A former political advisor to President Lee Myung-bak, Eun was rewarded with the job at the BAI after his boss was elected president. As an outsider, he could not have wielded much influence at the tight-knit and arrogant BAI. He could not have helped out Busan Saving Bank without conspiring with other insiders.

Prime Minister Kim said in testimony before the National Assembly that there had been a surge of lobbying on behalf of the saving bank industry. He should tell the prosecution what he knows so far. It is his responsibility to spearhead the investigation and lead the cabinet to restore Lee administration’s credibility among the public.