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Reporter's notebookGovernor, your aim is off, and you know it.

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Financial Supervisory Service (FSS) Governor Yoon Suk-heun / Korea Times file
Financial Supervisory Service (FSS) Governor Yoon Suk-heun / Korea Times file

Daunted top supervisor's misplaced scrutiny should be directed where it really belongs

By Lee Kyung-min

Korea's top five commercial lenders are likely to close only about 40 branches nationwide in the latter half, in addition to the 126 shuttered in the first six months of the year.

The marked drop in expected closures is at odds with their digitization initiative ― the top priority among financial service providers around the world ― and reflects a sudden change in plans brought on by rare vocal opposition expressed by Financial Supervisory Service (FSS) Governor Yoon Suk-heun weeks earlier.

"Banks rapidly reducing their number of branches citing reasons related to COVID-19 is undesirable, although the growing trend is inevitable amid a sharp increase of contactless transactions and their cost-reducing efforts due to dwindling net interest margins," Yoon said. He made these remarks during a meeting attended by senior officials of the organization, July 21, according to a highly unusual press release that specified the governor's statements in detail. The governor's comments during high-level meetings are not usually released for publication.

He promised a comprehensive investigation to look into the reduction of banks' branches. Also mentioned was "consumer protection, responsibility and thorough supervision," which he said were the key reasons behind the rather sudden, ill-timed call. His statement was largely criticized by most lenders that clearly feel ― but do not dare to go on record as saying ― that Yoon overstepped his bounds. The FSS has no authority to control the number of branches a bank has.

"The closures should not inconvenience financial service consumers, especially the elderly that are not as savvy with digital devices. Banks should take responsibility so as not to inconvenience their customers. I will order high-ranking FSS officials to be completely through with their supervisory responsibilities," Yoon said.

It was when I read the above sentence that I knew I was right to think there was something bigger behind the out-of-nowhere push.

Yoon was right to reiterate the three priorities that go to the organization's reason for existence.

Yet he couldn't be more wrong about which issue the "speech" should have been about.

No one has been in a tighter bind than the top supervisor whose three recent failures have led to a slew of fiascos involving high-risk, high-return derivative financial investment vehicles, encompassing securities, funds and notes repackaged and sold by many banks as well as brokerages.

The nearly 400 trillion won ($337 billion) in shaky investments managed ― or rather mismanaged ― by hedge funds was pooled in part by consumers, mostly the elderly for whom Yoon said particularly heightened protection is required.

The belated emphasis on consumer protection in that sense seems beyond pointless given his failure has already caused immense losses to the victims in their late 50s and 60s who bought products sold by sales officials at banks that ― due to little FSS oversight ― managed to care only about short-term profit at the expense of the lifetime retirement savings of many.

In a remark further lacking sincerity, Yoon said the lax oversight of many troubled hedge funds in question was attributable to a shortage of manpower and resources.

"The FSS has been criticized for poor work, but we are understaffed and so we have nothing concrete to offer. A comprehensive investigation into all hedge funds will begin after September, and it will take about three years," Yoon said during a National Policy Committee hearing at the National Assembly July 29.

Perhaps Yoon should use part of the manpower and resources allocated to investigate the reduction of banks' branches, given the issue that concerns the loss of a lot of money is understandably much more urgent and has greater, farther-reaching impact than customers having to travel a greater distance to find a bank.

Maybe Yoon wants to remind the public ― or above all, himself ― that he and the entity he heads have not become completely incompetent, in a much-needed desperate attempt to stay relevant amid a brewing public uproar.

But his words ― however right they may be ― will have no meaning, unless he uses them on the right occasion.

It might have been much easier to sanction banks over reducing branches than to take on high-profile hedge funds and the financial industry at large over what is highly likely to become a long, drawn-out fiasco. But it was a cheap shot.

The only thing worse than keeping accountability-dodging silence is a misdirected sense of self-redemption.

Governor, your aim is off, and you know it.


Lee Kyung-min lkm@koreatimes.co.kr


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