State Auditor Launches On-The-Spot Probes into Financial Regulators

The Board of Audit and Inspection of Korea (BAI) started special probes into the recent credit card crunch on February 2.

The state watchdog, which has conducted preliminary research for three weeks since December 10 of last year, sent about 20 auditors to the Ministry of Economy and Finance, the Financial Supervisory Commission, and the Financial Supervisory Service to conduct on-the-spot investigations. The probes, which are expected to continue until February 20, will likely lead to the reorganization of financial regulators.

“The crisis of the credit card industry is allegedly the result of a regulatory mess,” said Ha Bok-dong, director of the board’s financial audit bureau. “The probes will concentrate on the regulatory condition of credit cards, the reorganization of credit-card issuers, and the improvement of corporate transparency.”

The board’s special probe will also be aimed at finding out whether or not the dual structure of financial regulation, squarely divided by the Financial Supervisory Commission and the Financial Supervisory Service, works properly. Additionally, the board will hold the financial watchdogs responsible for rampant moral hazard within debt-ridden credit-card issuers that are currently under restructuring.

BAI chairman Chun Yun-churl on many occasions stated that he would hold senior policymakers directly accountable for (the credit-card meltdown). The probe will cause a series of censures and reprimands against the officials.

Jong-Hoon Lee taylor55@donga.com