[2020 National Audit] "Serious Issue of Parachuting in Financial Institutions... Cliques Culture Hinders Financial Reform"

Rep. Park Yong-jin: "Cliques Culture Undermines Laws and Systems... Institutional Improvements Needed"
"False Reporting by Korea Deposit Insurance Corporation Exposed... Financial Services Commission Shows No Will for Action or Reform for 3 Years"

[Asia Economy Reporter Kangwook Cho] Concerns have been raised about the serious issue of preferential treatment for former economic officials taking leadership positions in financial institutions. This culture of favoritism and exclusivity is hindering financial reform, highlighting the urgent need for institutional improvements.

On the 12th, Park Yong-jin, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, disclosed the status of former economic officials from the Ministry of Economy and Finance and the Financial Services Commission working at a total of 117 financial institutions?including banks, securities firms, life insurance companies, and associations?over the past six years since 2015, based on data submitted by the Financial Supervisory Service.

According to the data released by Representative Park, there are a total of 207 former economic officials (Mofia) currently employed at financial institutions. By sector, the breakdown is ▲public institutions 45 ▲banks 25 ▲securities firms 45 ▲life insurance companies 30 ▲non-life insurance companies 36 ▲associations 6 ▲others (card companies, savings banks, etc.) 20.

Among the eight public financial institutions, except for the Korea Development Bank (Lee Dong-geol), all others?including the Korea Inclusive Finance Agency (Lee Gye-moon), Korea Credit Guarantee Fund (Yoon Dae-hee), Korea Deposit Insurance Corporation (Wi Sung-baek), Industrial Bank of Korea (Yoon Jong-won), Korea Securities Depository (Lee Myung-ho), Korea Asset Management Corporation (Moon Sung-yu), and Korea Housing Finance Corporation (Lee Jung-hwan)?are headed by former officials from the Ministry of Economy and Finance or the Financial Services Commission.

The same applies to the heads of major financial associations, which are key lobbying channels in the financial sector. Among the six major financial association presidents, three?including the President of the General Insurance Association (Kim Yong-duk), the President of the Credit Finance Association (Kim Joo-hyun), and the President of the Korea Federation of Savings Banks (Park Jae-sik)?are former economic officials.

Park stated, "Last November, President Moon Jae-in also defined preferential treatment for former officials as a deeply rooted unfair area in our society and emphasized the need to eradicate it. While former economic officials may be recruited for their capabilities, they can become obstacles to financial reform, which is problematic."

He also pointed out the false reporting issue at the Korea Deposit Insurance Corporation.

Park said, "From 2013 to 2017, KDIC reported 'no findings in service audits,' but the Board of Audit and Inspection detected the same issues during the same period. However, the Financial Services Commission took no action against KDIC's false reporting over the past three years."

He added, "In the case of the Korea Securities Depository, former President Yoo Jae-hoon’s personnel irregularities caused damages amounting to 500 million won. Despite the problems and criticisms, the Financial Services Commission shows no willingness to investigate or improve related systems. It seems they are trying to overlook the issues because economic officials are heading these institutions."

Finally, Park emphasized, "The culture of exclusivity, preferential treatment for former officials, and parachute appointments are the words that the public hates the most and represent the tyranny of privileged classes. They undermine and weaken laws and systems. Institutional improvements are necessary."

In response, Eun Sung-soo, Chairman of the Financial Services Commission, said, "(I also) take the issue of preferential treatment for former officials seriously, and the President is strongly committed to addressing it. However, just because someone is from that background does not mean reform cannot happen. If done poorly, everyone will be criticized, so I will work with a reform-minded approach to ensure things are done well."

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