A vision that needs clarity
Financial Services Commission Chairman Yim Jong-yong emphatically highlighted the importance of financial reform when he served as chairman and CEO of Nonghyup Financial Group. His remarks last January, as one of the minor government financial authorities, drew keen attention from the financial sector. His statement that the authorities must not give up on reforms whatsoever became a clarion call for the need for reforms after he was promoted to chief financial watchdog.
Chairman Yim has declared 2016 a starting point for “rough reform” - an antonym for “soft reform” and a synonym for tough love. Although there is broad consensus among the public on the need for some reform, rough reforms could face vehement opposition from parties with vested interests. Yim said he will correct bad practices in the financial sector - even ones that have gone on for decades - after overcoming resistance from financial players, which is expected to be formidable.
However, the blueprint for rough reform that Yim presented on Sunday seems to fall short of our expectations. We couldn’t help but notice that it lacked a core part of the reforms needed in Korea. Yim has put top priority on eradicating financial agencies’ overly cautious attitudes and excessively strict seniority systems. In other words, he intends to establish a culture of meritocracy in our hardheaded financial industry. He also stressed the need to foster Internet banks and expand financial technology - so-called fintech - and push for policies tailored to the needs of customers.
But that is not enough. The key term for our economy going into the new year is structural reform, of which restructuring troubled local companies is the most urgent. A bill aimed at facilitating the restructuring of local companies through feasible debt workout programs could not be enacted last year due to an extreme political standoff between the ruling and opposition parties at the National Assembly. As a result, corporate restructuring arranged by creditors is gaining momentum. But it is regrettable that Yim did not come up with detailed strategies for such creditor-based restructuring of companies with chronic problems.
Moreover, his vision for our financial industry is still opaque. Finance is a mirror and guiding light for the real economy. It must not be considered a mere intermediary service between businesses and investors. It must be reborn as a cutting-edge industry capable of creating wealth on its own. There is no country that became an advanced economy without a mature financial sector. People say that Korea’s financial sector is even lagging behind Uganda’s, not in terms of absolute standards, but because of our relative weaknesses in the part of the economy. Rhetoric without a solid blueprint for upgrading our sclerotic financial sector could turn into an empty slogan. The chairman must remember that.
JoongAng Ilbo, Jan. 4, Page 30