End revolving-door appointments

Old habits - especially the bad ones - die hard. A deeply rooted habit among bureaucrats is revolving-door appointments and favoritism. As many as 10 former and incumbent senior-level officials from the Financial Supervisory Service, the country’s financial watchdog, have landed high-paying jobs in the financial sector. Among them are the director-general of the FSS audit office, the first incumbent senior member to land an auditing job in the private sector in three years.

When nepotism was cited as the reason for negligence in financial oversight during the mutual savings bank meltdown three years ago, the FSS publicly declared an end to revolving-door appointments. It banned public officials from having jobs in a similar line of work for two years after leaving office. But somehow the revolving-door tradition crept back in.

The FSS explained that the appointments were made at the strong request of financial institutions and the new jobs were unrelated to the public office of the candidate. The pursuit of financial companies for active senior officials from the financial watchdog underscores the underdeveloped mind-set of a financial industry hoping that connections would help business or avoid punitive actions. One bank official said if an auditor’s seat is reserved for a public official, then it’s best that the official came from the FSS and was in charge of regulations and supervision.

The revolving-door legacy had mutually benefited the regulating agency and the industry. Financial entities hire FSS officials to lobby and protect their interests, while public employees are happy to be guaranteed fat paychecks and a comfortable lifestyle after retirement from the public sector. As long as the bargain lives on, it is hard to expect vigilance from the regulator. Many have been charged with wrongdoing during the mutual bank crisis, pocketing bribes thanks to behind-the-scenes connections with financial institutions. The auditors at the credit card companies that are under fire for the largest-ever leak of client information also came from the FSS.

Behind major financial sector scandals, there have always been officials from the FSS who joined the companies through the revolving door. And every time, the government and FSS pledged the practice would never recur. But the practice will never go away unless the mighty power of the FSS remains above the law in the financial industry.

Without cutting the connection, the country’s financial sector will never gain competitiveness through high standards.

JoongAng Ilbo, March 12, Page 34