[Inside Chodong] The Conditions for a Respected Bank

'Banco' means desk in Italian. For Koreans, Italy's Florence is imprinted with the red-domed Duomo. In 1396, Giovanni di Bicci de' Medici set up a banco on the street here and started lending money. This banco later became the etymological root of the word bank. Until the Middle Ages, charging interest on loans was considered a sin. This stereotype was overturned because the influence of the Medici family was absolute.

They bought power with money, crossing the realms of religion and politics, and revived art and scholarship. They toppled political rivals with money, hired mercenaries, and expanded their territory. The saying "Nothing is higher than the Medici family but the clouds" emerged, showing everything that money could achieve in human history. Yet, they were socially accepted because they sponsored artists and ushered in the Renaissance era.

The Uffizi Gallery in Florence was created when Anna Maria Luisa, the last heiress of the Medici family, donated her entire fortune to the city. Michelangelo, Botticelli, Leonardo da Vinci, Raphael ? masterpieces by these masters spanning eras were displayed without hesitation, with only one condition she imposed: the artworks must not be taken out of Florence. The Uffizi Gallery still allows visitors to appreciate how respected the Medici family was as bankers.

More than 600 years later, the financial industry has entered a completely different dimension, making the word "development" almost meaningless. However, perceptions of banks have regressed to the medieval society before the Medici family appeared. Due to criticism that banks profit from interest during rate hikes, their status has long been degraded. Embezzlement using customers' money as hostages continues unabated. As seen in Asia Economy's exclusive report "Shinhan Bank Gangnam Branch Embezzlement Incident Involving Hundreds of Millions" (May 9), similar crimes have persisted even after last year's Woori Bank embezzlement case involving 70 billion won. This is why people think of banks with ridicule and distrust.

What are the conditions for a respected bank in the 21st century? To ensure objectivity, I asked ChatGPT, which cited safety and transparency first. The gist was that customer money must be safely protected and financial transactions must be fair. In industry terms, this directly relates to "improving bank governance and internal controls." Ordinary people might wonder what this has to do with them, but in fact, it is closely connected. This link was also discussed at the 12th Seoul Asia Financial Forum held on the 25th ("Desirable Financial Company Governance and Internal Control Systems").

"Private equity funds like Lime, Optimus, and DLF were sold without sufficient risk disclosure, causing consumers to suffer massive losses. This was because there were no internal control standards such as operational regulations during the sales process." (Lee Hyo-seop, Director of Financial Industry at the Korea Capital Market Institute)

The background of the reckless private equity fund incidents mentioned in this presentation points to short-term performance aimed at the reappointment of holding company chairmen. If management were evaluated on long-term performance, if there were outside directors who voiced critical opinions, and if standards specifying regulations and pre-designated responsible persons were established, such products would never again gain a foothold at bank counters. Embezzlement incidents are also unlikely to occur in transparent and dynamic organizations. When banks prove the formula "improving governance and internal controls = protecting financial consumers," public perception of banks will change.

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