[Desk Column] A Lesson from the Financial Supervisory Authorities' Mistakes

[Asia Economy Lee Cho-hee, Head of Finance Department] Tasanjiseok (他山之石) and Banmyeongyosa (反面敎師). These are four-character idioms frequently used in daily life. Both share the similarity of gaining lessons for the future from past experiences. However, their meanings and usage are distinctly different. Tasanjiseok means that even small and insignificant separate matters can help one’s self-cultivation. On the other hand, Banmyeongyosa means using another person’s faults as a 'mirror' to avoid making the same mistakes. Similar, yet different.

Recently, the novel coronavirus disease (COVID-19) has brought daily life in the Republic of Korea to a halt. A single infectious disease has paralyzed the entire national society. It has shocked the already weakened Korean economy.

COVID-19 is following the exact pattern of the 2003 Severe Acute Respiratory Syndrome (SARS) and the 2015 Middle East Respiratory Syndrome (MERS) outbreaks. At that time, the government and political circles all loudly called for Banmyeongyosa. They emphasized that since holes in infectious disease prevention had pushed the people and nation into crisis, the national infectious disease response system must be thoroughly overhauled.

Five years later, did the current administration, which sharply criticized the government’s incompetence, practice Banmyeongyosa? Just before COVID-19 began to spread in earnest, many suspected patients visited screening clinics but were repeatedly denied testing. If there was no record of travel to China or overseas, and no contact with confirmed patients, they were sent away. Some of these individuals were later confirmed positive after a few days.

Right before the MERS outbreak in 2015, the daughter of the third confirmed patient requested isolation treatment from health authorities due to fever symptoms. At that time, the authorities sent her home because her fever was not 'high enough.' This patient was later confirmed as the fourth domestic MERS case. Also, Minister of Health and Welfare Park Neung-hoo emphasized until last month that the human-to-human transmission rate of COVID-19 was not high. Similarly, in 2015, then Minister Moon Hyung-pyo received harsh criticism later for making the same statement at the early stage of MERS. It was d?j? vu.

As of midnight on the 2nd, the number of confirmed COVID-19 cases in Korea surpassed 4,000. The Shincheonji Church of Jesus became the catalyst for the spread of infection. However, who the initial Shincheonji infected person was and how the virus was transmitted to them remains a mystery. This suggests that, separate from Shincheonji, there were holes in the government’s quarantine network. What has the current government learned since the SARS and MERS incidents?

The financial sector comes to mind when thinking of Banmyeongyosa. Korea’s financial market has experienced numerous ups and downs over the past decade, including the International Monetary Fund (IMF) crisis, the global financial crisis, household loan defaults, and the KIKO incident. Every time a major financial accident occurred, the heads of financial supervisory authorities have loudly called for Banmyeongyosa. They pledged not to repeat the same mistakes and to prevent recurrence. However, when problems arose, the responsibility fell on private financial companies. The supervisory authorities only handled the closing remarks.

The shock from the overseas interest rate-linked derivative-linked funds (DLF) and Lime Fund incidents still shakes the financial sector. It is well known that the DLF and Lime incidents were not only due to 'financial companies’ faults' but also significantly caused by the 'financial authorities’ failure' to thoroughly supervise. At the regular Financial Services Commission meeting scheduled for the 4th, the level of sanctions against the institutions responsible for the DLF incident will be finalized. Once institutional sanctions are confirmed, the heavy disciplinary results for Sohn Tae-seung, Chairman of Woori Financial Group, and Ham Young-joo, Vice Chairman of Hana Financial Group, will also be notified. It is essentially the final stage.

The Financial Supervisory Service (FSS), which wields strong power, is again being criticized for not taking responsibility for supervisory failures. The COVID-19 issue should not be buried and conveniently concluded as 'only a financial company problem.' Will we only learn from others’ mistakes this time as well? The financial authorities need self-reflection and a responsible attitude.

This content was produced with the assistance of AI translation services.