The Financial Supervisory Service recently said it would consider resuming the practice of disclosing data on corruption in the financial sector, as criminal activity by executives and employees of financial companies shows no signs of abating.

Until 2004, the watchdog made public its corruption statistics for each segment of the industry. But it discontinued the practice in the face of opposition from financial companies.

Financial firms have since made voluntary efforts to prevent their officials from getting involved in wrongdoing. But their internal oversight has been ineffectual, as evidenced by an upward curve in financial scandals.

The financial regulator was particularly alarmed by a recent surge in the instances of employee misconduct. As of Aug. 10 this year, it disciplined some 450 employees at financial companies, more than double the 222 it punished during the same period last year.

The banking sector has been plagued by a continuing series of embezzlement and fraud cases. Last month, a high-ranking official at Woori Bank was arrested on charges of embezzling around 3.1 billion won ($2.74 million) of customers’ money.

At Shinhan Bank, a branch manager was arrested for involvement in a scam to swindle over 100 billion won out of the bank. The bank also fired 18 officials who were found to have embezzled service fees from customers by funneling them into their secret bank accounts.

Officials at Kookmin Bank recently raised serious questions about their professionalism by changing the terms of loan contracts without the consent of the borrowers. The bank inspected all of its 881 branches across the nation and found more than 9,600 such cases.

Public trust in banks was eroded by the allegation that they colluded with brokerages in fixing the interest rate on certificates of deposit, a benchmark rate for household loans, mortgages and bank derivatives.

But when it comes to corruption, the banking sector is in better shape than other industries because banks are under stricter regulatory supervision.

Savings banks have become a synonym for corruption following the prosecutors’ investigation into more than a dozen suspended banks since early last year.

Yet irregularities are probably more serious at various types of credit cooperatives, as they remain beyond the scope of the financial watchdog’s scrutiny.

For instance, the authority to supervise community credit cooperatives is vested in the Ministry of Public Administration and Security. Yet the ministry lets the Korean Federation of Community Credit Cooperatives do the job, leaving much room for malpractice.

For agricultural, fisheries and forestry cooperatives, the FSS shares supervisory authority with the Ministry for Food, Agriculture, Forestry and Fisheries. This makes it difficult for the watchdog to fully oversee the cooperatives.

FSS officials reportedly lamented that malpractices have been so rampant at credit unions and agricultural and fisheries cooperatives that they could not be called financial companies. Yet no attempt has ever been made to bring to light the problems that have been festering in this segment.

Under these circumstances, it is absolutely necessary to disclose statistics on corruption in the financial sector. To give a jolt to financial companies, the FSS needs to present corruption data on a company basis rather than on a segment basis, as it did previously.

Data disclosure would touch off competition among financial companies to enhance their trustworthiness. This could also set in motion a restructuring process as consumers would desert corruption-ridden companies in favor of clean ones.

To curb corruption in the financial sector, the FSS also needs to strengthen its supervision and toughen punishment. The penalties it metes out to financial companies are often nothing more than slaps on the wrist with little deterrent effect.

Financial companies, for their part, need to strengthen internal controls. They have thus far focused on expanding market shares and tended to gloss over ethical issues. Now they need to increase their numbers of compliance officers and auditors and share their best practices in keeping employee misdeeds in check.

At the same time, owners and employees of financial companies should have a strong sense of vocation. They should remember that the nature of their business is highly public. This means they are held up to the same ethical and moral standards as public officials.

If they internalize a sense of responsibility, they would be far less tempted to commit malpractice. This is the least costly way to curb corruption.