Excessive regulation is a great hurdle to financial innovation

With a sense of crisis that there cannot be a strong economy without a strong financial sector, The Dong-A Ilbo has covered stories in financial sectors in and outside the country from domestic banks, securities, insurance, and credit card companies to overseas financial companies for the past month. As a result, it became clear once again that the domestic financial industry is still suffering from excessive regulation and it is considered as a public infrastructure that exists for real economy, such as the manufacturing sector or government’s policy actions.

Financial companies in other countries are busy creating new industries by combining digital technologies with finance without much regulation. On the other hand, domestic financial companies are bound by various regulations, failing to advance into overseas markets and operating only within the country.

As a result, the world’s 12th largest economy with a GDP of 30,000 U.S. dollars does not have a bank in the world’s top 50 banks list and an asset management company in the world’s top 100 asset management companies list. Banks that have grown in size depend on interests they charge on security loans instead of creating new financial techniques and products.

Still, they are largely affected by government policies. The credit card fees, which are credit card companies’ biggest source of revenue, are determined by the government in Korea. Despite credit card companies’ strong disagreement of the policy, the government is keeping it in place to cater to voters since 2012. Any verbal guidelines and administrative guidance from financial authorities as well as regulations including acts and ordinances are outdated vestiges that should be eliminated immediately.

Previous administrations had their own financial vision: “Financial hub in Northeast Asia” of the Roh Moo-hyun administration, “Mega Bank” of the Lee Myung-bak administration, and “Creative Finance” of the Park Geun-hye administration. The current administration is determined to oversee financial companies but does not even have a clear vision to make the financial sector stronger. With our talent and information technology, it is not impossible for the financial sector to make global companies such as Samsung Electronics. There is a joke that says Samsung was able to become a global company because there was no semiconductor department in the Ministry of Trade, Industry, and Energy. This joke reflects the reality of our financial companies, which are strictly bound by government regulations.