FSS’s fatal dereliction of duty

It is a deja-vu from last year’s mutual savings bank debacle. The major shareholders are more or less thieves, stealing customers’ savings for illegal loans, embezzlement and bribery. They became more bold and inventive to dress their windows in disguising their illegal acts and financial books such as borrowing names to extend new loans, paying interests on behalf of defaulters, and increasing shares through cross trade.

But again, financial authorities failed to catch them in their act. The Financial Supervisory Service’s primary role is to keep eyes on any irregularities by shareholders. It has routinely and unexpectedly checked up on mutual savings banks because they have been on the special watch list. Yet we cannot understand why corruption and wrongdoings by major shareholders are only bared after their mutual savings companies are suspended. Are financial authorities in it together or plain incompetent?

Authorities had been lax from the rudimentary screening procedure on major shareholders. Mirae Savings Bank Chairman Kim Chan-kyong’s falsified school record has already been known. He disguised himself as a law student at Seoul National University and was kicked out of a large company soon because of his forged degree. The FSS approved his acquisition of a financial company despite his dubious record.

Let’s say financial authorities chose not to be judgmental. They, however, should have watched him closely as he continued to purchase weaker mutual savings bank. If authorities did not know of his background, they have been thoroughly negligent in their work. If they approved the acquisition even while they were fully aware of what kind of man he was, it’s dereliction of duty. Kim himself is a credit delinquent for failing to fulfilling debt obligation worth 16.4 billion won last year. Under the mutual saving bank law, a credit delinquent cannot be a large shareholder. Yet the FSS took no action to restrain him.

Kim took out 20.3 billion won from customers’ accounts before his bank was suspended. The FSS insists it did not know of the withdrawal of such great amount from a bank outlet for 14 hours as the money was taken out after business hours.

Losses by clients and taxpayers have increased because financial authorities have not done their job properly. If they supervised majority shareholders and accounting well, stock investors could have lessened their damage. There may be calls demanding closure of FSS because of its uselessness.