beyondbrics

Occupy Wall Street members in the US

When it comes to demonstrations, Koreans are second to none. The country’s vociferous civic groups and militant labour unions plan to join the “Occupy Wall Street” movement in the US and hold a massive rally this weekend in Yoido, central Seoul, where most major financial institutions and regulators are based.

Under the slogan of “Occupy Yoido” about 1,000 demonstrators from about 30 civic groups will gather in front of the country’s top financial watchdog in Yoido for a two-day rally. People from all walks of life are expected to show up to press their various causes ranging from regulating the financial industry, cutting rent and tuition fees, to scrapping the free trade agreement with the US and strengthening protection for irregular workers.

Civic groups fume that Korean banks are prospering at the expense of their customers by generating the bulk of their income from interest margins. They also complain about fat salaries and bonuses for bank executives and hefty dividends for large shareholders, claiming that their “speculative” management for short-term high profits have incurred huge losses for many customers.

“We hope that the upcoming event will be an occasion to help financial institutions recover their public role and bring in changes in the bipolarised society,” said Korea Finance Consumer Association, a leading consumer rights group.

The planned gathering is clearly unnerving financial regulators, who have come under fire for their failure to properly oversee troubled savings banks. Dozens of ailing banks were closed in recent months for mismanagement and corruption, sparking an outcry from depositors.

“The financial industry should stave off their excessive greed and moral hazard,” said Kim Seok-dong, the country’s top regulator.

He urged financial firms to refrain from paying out hefty bonuses and excessive dividends and beef up their efforts to protect companies and investors in tough times, noting that about Won160,000bn of public funds were injected into troubled financial firms in the wake of the 1997-98 Asian financial crisis.

South Korean banks have reported record profits this year but foreign bankers often complain about government officials’ “distorted” perception towards local banks. In Korea, banks have been traditionally regarded as public institutions that should offer welfare protection and cheap loans to ailing small businesses and low-income people.

Given the growing public anger against well-paid bankers and record profits, it will be a daunting task for bankers to change the public perception and make Koreans realise that they are, in fact, profit-oriented commercial lenders.

Related reading:
Korean/US trade: no big deal, beyondbrics
South Korea: labour union strikes back, beyondbrics
South Korea: foreign banks and cartoon villains, beyondbrics
South Korea’s banks face M&A hurdles, FT