External Pressure on Financial Supervisory Service?

The Financial Supervisory Service (FSS) belatedly launched an investigation into Kimcheon Savings Bank on February 4 even though the FSS got concrete information that the bank was involved in illegal loans last December.

Moreover, the FSS dismissed information that Good Money, a moneylender, was in fact the buyer of the bank last November.

The timing when the FSS received information is consistent with the time when Good Money was reported to have given illegal campaign funds.

“I knew that the FSS was under external pressure,” said Kim Jin-hui, who gathered people willing to lend their names in relation to the illegal loans of Good Money. Kim’s comment raised suspicion that the FSS might not have thoroughly done its job under the pressure.

The Financial Supervisory Service received information that the real buyer of Kimcheon Savings Bank was Good Money on November 12, 2002. It was also informed on December 16, 2002 that the bank was involved in illegal loans.

Rather than launching an investigation immediately, however, the FSS belatedly examined the case on February 4, 2004.

“We decided to launch an investigation in the first quarter of 2003 because the amount of loans and deposits of the bank has increased dramatically since the bank changed hands in September 2002,” explained Yu Byeong-tae, a director at the FSS.

“Target companies of an investigation were very busy in settling their accounts in mid December, so we did not start a probe. Besides, the FSS was stretched very thin in terms of manpower as we, together with the police, were checking anti-crime measures of financial firms during the holiday seasons.”

The FSS filed lawsuits against eight people including Yun Kyo-yeong, CEO of the bank, Hwang Yung-kwang, a large shareholder, Kim Yeong-hun, former CEO of Good Money, after the investigation.

However, the FSS discounted the information that Good Money was the real buyer of Kimcheon Savings Bank only after investigating Mr. Yun. Moreover, it did not even consider investigating Good Money.

“Money-lending businesses are beyond the jurisdiction of the FSS,” said Director Yu. “I have never met the former CEO of Good Money.”

“In fact, the managers of Good Money simply cannot loan 54 billion won illegally without controlling Kimcheon Savings Bank,” said a person in the loan business. “I know that the staff who led the illegal lending of Good Money actually came from the bank.”

Accordingly, suspicion is rising that the FSS turned a blind eye to Good Money while investigating into the bank.

Keuk-In Bae bae2150@donga.com