Gwanfia casts pall on new agencies

A handful of new government agencies that will oversee the financial sector are expected to be created in the second half of the year, but lawmakers and the general public can’t stop frowning, believing that the new entities will only give jobs to former public employees.

The financial authority will create five new bodies on consumer protection, credit information, information security, microfinancing and oceans finance to address major problems that have surfaced since last year.

For example, the Financial Services Commission announced the creation of an agency on information security to oversee security policies at financial institutions after the nation suffered its worst personal information breach last year. The leak wasn’t discovered until January.

Creation of such new agencies is not welcomed by the public that remember rampant “gwanfia” practices.

Gwanfia refers to former government officials taking top jobs at state-run agencies or private institutions after their retirement.

“The Financial Services Commission’s intention is to have spare jobs for its officials after retirement,” said Kim Gi-juhn, a lawmaker of the New Politics Alliance for Democracy, at a National Assembly meeting last month.

The meeting was held to discuss revisions to the credit information use and protection law, which was to be the basis for a new credit information protection agency.

“Every time something happens, the government says there needs to be a special institution to address the issue,” Kim said. “It is only to make positions for government officials.”

Such practices are not new. After the outbreak of the 1998 Asian financial crisis, the government created the Korea Deposit Insurance Corporation. In 2005, after a series of hacking incidents at major banks, the government established the Financial Security Agency.

The problem of gwanfia comes afterward. Once established, former government officials invariably surface as heads of the institutions.

Not only lawmakers but many in the private financial sector believe the new institutions likely will be headed by retired government officials.

The Korea Federation of Banks, which is expected to end up with a new agency on credit information as a subsidiary, is already a hotbed for parachute appointments. Nine of the past 10 chairmen of the federation were former government officials. Three out of four heads of the Financial Security Agency served at the Financial Supervisory Service.

For the new consumer protection agency, it is expected the Financial Services Commission will exercise its clout over appointment of the head.

Such move would go against the president’s fight against gwanfia. The FSC recently said it may not set up a new body on security, but expand the Financial Security Agency instead.

“If former government officials get in the new agencies, the purpose of creating them will be tarnished,” said Jeon Seong-in, professor at Hongik University. “The government needs to nominate real experts a heads of the new institutions if it wants to prove its earnestness.”

BY PARK JIN-SEOK, LEE JI-SANG [ssh@joongang.co.kr]