Financial Deregulation
on the Horizon

New FSC chairman Jeon pledges a fix to regulations separating financial and industrial capital

Chairman Jeon Gwang-woo of the Financial Services Commission said recently that the separation of industrial and financial capital will be relaxed gradually to reduce the side effects on the further development of the financial industry, adding that the issue of easing regulations cannot be done rapidly and irrationally. He acknowledged, however, that the system has been managed too strictly.
In a briefing session with the media, the new FSC chairman said President Lee supported his plan on managing the issues related to easing the separation of financial and industrial capital. He said he could sense the president's deep concern for the importance of the financial industry during their meeting.
The relaxation of regulations is a basic direction and the problem now is how to go about it and how fast and broad the measures should be to ultimately benefit the economy. He said the committee will conduct a study on the issue and develop a plan before making any moves.
The new FSC chairman, who worked for the World Bank for 12 years, said there are many countries that maintain the separation system of financial and industrial capital, but it is best to manage it in such a way that it would be suitable for the country's economy, when asked to comment on those opposed to easing restrictions.
Under the current situation, only foreign investors can invest in the Woori Financial Group when it is privatized. The new chairman, however, said the move is contingent upon the reduction of loan losses from indiscriminate loan provisions, which was the cause of the financial crisis in 1998.
Chairman Jeon also said the privatization of the Woori Financial Group and the Korea Development Bank should be made correctly rather than speedily as with any mergers and acquisitions. What is important in the privatization of government-owned companies is not who owns them, but how much they would help the financial industry, he said.
He said the committee will take a hard look at the capital separation issue on the same level as the privatization of government-owned companies to make sure that it will benefit the financial industry. He is sure of the president's strong support to the FSC for its actions.
President Lee, he said, told him during an hour-long meeting that the success of the FSC would be a test bed for the new government's success during its five-year rule, saying the new government's moves for advancing Korea will include the development of the financial industry and its globalization at its core.
On the issue of amnesty for 7 million financial defaulters, he said a basic and thorough study is now being conducted on the matter and a rational plan will be prepared from the study to cope with the issue.
When asked about his philosophy on the financial industry's importance, the new FSC chairman said finance is like a heart and nerve system in humans and the role of the financial industry is key to further upgrading the economy.
Chairman Jeon's close connections with leaders in many areas of society has been the talk of town since he was named to the current post, a crucial position in the financial industry, a "financial czar"in fact. He has friends in the academic, government, finance and industrial sectors.
Sources said his association with the IBRD for over 12 years has been a base for building his wide connections. He was a special assistant to the Minister of Finance and Economy from 1998 to 2000, after quitting the World Bank. He worked with such key figures in the governmental financial sector as former MOFE ministers Lee Kyu-song, Kang Bong-kyun, Lee Hyun-jae and Jin Nyum.
He is also close to former MOFE Minister Kwon O-kyu, and is so well known for his expertise in international finance that Kwon recommended him to be an international financial ambassador.
He is also a friend of former chancellor of Seoul National University Dr. Chung Woon-chan. He worked for Chung on the Financial Development Deliberation Committee for two years from 2002 when Chung chaired the committee.
Jeon was also an outside director of the board of directors of POSCO, which led to him becoming a close acquaintance of POSCO Chairman Lee Ku-taek. They still hold high mutual respect for each other, sources said. nw

Chairman Jeon Gwang-woo of the Financial Services Commission