DPM Lee Rules Out Official Meddling
- In financial market with market-friendly manner

Deputy Prime Minister and Finance and Economy Minister Lee Hun-jai said recently that the issue of bancassurance should be approached from the perspective of liberalization of financial services. He also said the government would not meddle with the financial market for its stability under pressure, but it will approach it in a market-friendly manner if crisis symptoms emerge.

In his speech at the gathering of top executives of financial institutions at Chosun Hotel, he said he will make sure that there is no room for the government meddling with the financial market in policies as well as supervisory activities.

He will try to have the financial watchdogs to focus on surveillance rather than post-investigation and restrictive moves. He said restrictive moves would be taken based on the result of an investigation of suspicion during this process. The entire process will be documented  for continuous surveillance of the financial market. He explained that aptitude-nature inspections should be firm and yet transparent based on global standards so that they would be applied properly to financial managers. The top economic policymaker said he will strengthen his efforts for balanced development of the financial industry and in this respect, he will see that restructuring of the second financial sphere carried out without problems including the credit card and financial trust companies.

He also told top financial managers that the Indirect Investment Asset Management Law would be approved by the National Assembly, which would include the establishment of private equity fund. He hoped that leading financial companies would take the lead for active utilization of this new system so that it would take a deep root in the financial market.

As to the argument concerning the second-stage bancassurance plan, he said it should be approached from the stand point of the financial market diversification and autonomy. He said some argue that there ought to be screens in the financial industry, but we will never return to the old system of screens for different financial sectors. DPM Lee also pointed out that competition among banks has been too attritional with the emergence of such negative factors as herd behavior and "me too product" which would heighten the managerial crisis and threaten to destabilize the financial market.

He said the banking sector has successfully completed its restructuring, but the non-banking sector lagged behind its reform, which could bring imbalance among the financial sectors, hurting the diversification of  financial services.

Lee went on to remark that leading financial companies should not think that they engaged in competition in the domestic financial market, but seek the chances for mutual growth through intensive competition with foreign financial institutions.

They need balanced development of the financial industry. Large domestic financial companies would have to compete with their foreign rivals and enhance their growth, while smaller financial companies  would have to specialize and pursue their own means of survival. Under these conditions, fair financial market operation is inevitable and financial policies in the future will be keyed to balanced development of the financial industry.

As one can see, Lee said the financial industry is at the crossroad in terms of the financial market practice, its structure and financial demand. He said we need new policies  to overcome various problems and cope with changes in the financial market practice and structural changes.

He added that they ought to be able to boost their competitiveness through an effective management of their governance and crisis management systems.

He also went on to say that the tenures of CEOs of financial institutions should be extended to give them enough time to finish their management plans, which would take more than three years in general.

Lee also said the Korea Financial Institute should focus their research on the areas that would help the financial organizations need rather than concentrating on macro-economy.   nw