[Editorial] Financial Restructuring Law Back on Track

The ruling Uri Party has decided to change fix the "Law on Financial Industry Restructuring" so that Samsung's financial subsidiaries will be required to sell their shares they own beyond 5 percent in other Samsung subsidiaries within a set period of time. The fact that president Roh Moo Hyun expressed his view on the matter at a gathering with Uri members of the National Assembly's Finance and Economy Committee appears to have been a big factor in concluding to take that course of action. Which is unfortunate, because it seems to prove how the government and ruling party have been afraid of Samsung to the point where the president himself has to take a stand.

The problem began when there was no provision for punishing Samsung Card and Samsung Capital, which each own more than 5 percent in other Samsung companies, even though they are in violation of the law. The government had revised the law so that financial companies could be ordered to sell their stakes, but it was criticized for "protecting Samsung" because it had decided against applying it in Samsung's case even though it was in violation of the rules.

It goes against market logic to allow money that customers entrust to a jaebeol-owned financial company be used to help the tycoon assert control over his jaebeol, and requiring stakes over 5 percent to be reduced to that is justified. Now the issue becomes how much time to give financial companies before they have to reduce their ownership of other companies in their same conglomerates to 5 percent. The ruling party wants to give them five years, but Samsung must not be given the opportunity to hold off as long as possible and make that regulation an issue again while there's still time left. The law should require shares be sold off gradually, with a year-by-year timetable, so that the process is complete within a specific time frame.

The suspicious attitude displayed by finance-related bureaucrats in the course of revising the amendment proposal needs attention and must not be overlooked. The Financial Supervisory Service's (FSS) legal team and the Financial Supervisory Commission's (FSC) group of outside advisors said there would be no constitutional issues with forcing Samsung's subsidiaries to sell off whatever exceeds the 5 percent limit, and yet, it was recently revealed, the Finance and Economy Ministry ignored that advice and revised the amendment proposal in a way advantageous to Samsung after following only the advice of experts that Samsung put together. The people cannot trust their government if that is how things are going to be. Cheong Wa Dae must engage in a thorough inquiry into what happened at the Finance and Economy Ministry and take appropriate action in response.

The Hankyoreh, 27 September 2005.

[Translations by Seoul Selection (PMS)]