Some scandals titillate. Others can shock or make you laugh. But a few resonate because they reflect a deeper unease – a feeling that something, somewhere, isn’t quite right.
So it is with Woori Bank, which was rocked in October by claims it bought financial favours by offering jobs to the children of powerful public officials. Since then South Korea’s second-largest lender by assets has lost its chief executive, been castigated in the public realm and raided by federal prosecutors.
To an impartial observer with no knowledge of the machinations of Korea’s economy and society, this might seem a storm in a teacup. True, the charges do not reflect well on Woori. It cannot be coincidence, its detractors say, that the bank offered jobs to college graduates at the precise moment that its coffers were flooded with cash from public agencies run by their mothers or fathers.
Documents shown in parliament by a fiery lawmaker, Sim Sang-Jung, corroborate these allegations. One cogent example involves the alleged transfer of W193 billion ($180 million) into Woori’s accounts by a regional government, in exchange for them hiring the son of the deputy mayor. This smacks less of “hiring irregularities” and more of old-fashioned bribery.
It is hard to feel too sorry for Woori. The bank is riven by a factional dispute that stems from its creation in the late 1990s. Many believe the files were leaked by disgruntled insiders. Nor was it careful about masking its actions. Of 150 jobs handed to graduates in 2016, 16 were snaffled by the offspring of senior officials at the likes of the financial regulator and national spy agency.
And therein lies the rub – and the reason why this scandal resonates. It is easy to forget the staggering pace at which South Korea has developed. At the start of the 1970s, it was still poorer than North Korea. It has only been democratic since 1987. The great brands we now take for granted only emerged onto the global stage in the last decade.
But while parts of the economy have accelerated at warp speed, others have barely changed. Corruption at society’s base is a distant memory, but at the top it continues to flourish – witness the scandals that have dogged big firms in recent years, from Woori Bank to Lotte Group to Korean Air. Last year – 2017 – saw the heir to the Samsung dynasty jailed on bribery charges and the country’s first female president, Park Gyeun-Hye, impeached.
As recently as the 2000s, many of these scandals would have been brushed under the carpet or simply ignored. But Korea has changed. Past generations equated corruption with the cost of doing business, while young people associate it with criminality. When stirred, they get up and march. Park’s arrest followed weeks of mass protests.
Woori’s behaviour provoked an angry response from graduates who emerge from college loaded with debt, only to find the best jobs snared by the scions of the wealthy and well connected.
There is a bigger picture here; it involves the financial economy and its lack of progress. While Korea’s carmakers and smartphone innovators bestride the world, its leading banks are homebodies.
The likes of KEB Hana Bank, Shinhan Bank and Woori Bank, stymied by falling profits at home, are buying assets and opening branches in fast-growing markets in Asia. But their foreign scale and presence is minute compared with their Japanese and Chinese peers. None of the big Korean banks is a player on the regional stage, let alone the global one.
Other financial frailties emerge when you look closely. Asia’s third-largest economy is still listed as an ‘emerging’ market by index provider MSCI, largely due to limited global liquidity and presence of the won.
Korea’s economy has come so far, so quickly. Big firms have gone global. People power often transforms Seoul’s streets into a second parliament. A once rigid society is a big exporter of art, films and music. But financially, the country lags behind. Its big banks remain bashful explorers, intimidated by the world stage.
And Woori’s woes are emblematic of another challenge: making banks not just more outgoing, but better run and more transparent. When presented with a challenge, South Korea always steps up to the plate. It needs to do so again.