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| March 18, 2000 | atimes.com | ||
|  | The Koreas Seoul pushes for a new 'big bang' in banking SEOUL - The South Korean government pledged early this year that it will no longer lead restructuring in the financial sector but leave it to the market to initiate further reform. But just two months later, the government is back in the driver's seat. Bank insiders predict a series of government warnings and moves in the financial industry will lead to another ''Big Bang'' in the banking sector. Finance and Economy Minister Lee Hun-jai and Financial Supervisory Commission (FSC) chairman Lee Yong-keun had said state intervention in financial restructuring was no longer necessary. Now they are demanding that banks conduct a broad-scale transformation into digital entities from analog. ''Cyber financing will lead the industry soon. We need engineers and information technology experts in the industry instead of bankers,'' Lee Hun-jai said. ''We have to change the people and the organization.'' Lee of the FSC, in a lecture at the Korea Institute of Finance, said that going digital is not about choice but about survival. Both Lees have suggested that executives who have no ability to meet the changes should resign. The government says its impatience is justified. ''The shift from analog to digital does not signal a mere change in computer systems. Banks are calling themselves 'cyber' and 'Internet' banks after setting up a simple home trading system which is not even security-safe,'' one ministry official said. ''They are not following global trends well. Banks in the United States, Europe and Japan are all merging for greater technological effect. But our banks do not have 'first mover's advantage' in the digital industry.'' What the government wants is the wave of mergers and acquisitions sweeping the global banking industry to hit South Korea. Lee Yong-keun made that clear on Thursday. Speaking on the urgent need for digitization in the financial sector, he said the government may merge Seoul Bank with another bank if it cannot find a suitable CEO prior to next week's shareholders' meeting. Domestic financial institutions must get bigger in order to survive cross-border competition, he said. Bank insiders and ministry officials predict Seoul Bank may merge with more than one strong bank because the former's debts are too heavy for one to handle. The idea of Seoul Bank as a merger target has reportedly been tapped among Kookmin, Housing and Commercial, Hanvit and Cho Hung banks, inside sources say. ''What is interesting is that the talk of a merger coincides with the recommendation of FSC vice-chairman Kim Sang-hoo as the new president for Kookmin Bank. You could see something here,'' one source said. The naming of Kim spurred strong protests and angry walk-outs from bank unionists, who say the decision shows the revival of government control over banks. ''Kim is being recommended to speak for the government in the second-stage restructuring plan with Kookmin and other banks,'' the unionists said in a statement. Kookmin's board of directors had to hold a secret meeting in order to avoid clashes with unionists and approve the recommendation. Kim will officially assume his post if his recommendation is approved at a shareholders' meeting on Saturday. The government is the second-largest shareholder in Kookmin, with 7.76 percent if Korea Pension Management Corp's 1.28 percent stake is included. Goldman Sachs is the largest with 11.07 percent. The government's equity holdings, however, are actually greater if the stake of the nationalized Korea Investment Trust and Daehan Investment Trust are included. (Asia Pulse/Yonhap) | |||||||||
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