In early March, outgoing Financial Supervisory Service Gov. Kim Jong-chang issued a strong warning against excessive competition among domestic commercial banks.

One example cited by the top regulator, who quit on Friday as his three-year term expired, was the recent scramble among banks to attract big corporate customers. It was triggered by Kookmin Bank, which sought to boost corporate lending by offering lower interest rates. Other banks followed suit to retain their clients.

Kim also referred to household debts, which have approached 800 trillion won in total, a figure that amounts to about 80 percent of the nation’s gross domestic product. Heated competition among banks in mortgage lending played a significant role in raising household debts to such an alarmingly high level.

Thus Kim was right when he warned that reckless efforts by banks to expand assets would not only undercut their profitability but destabilize the financial sector and ultimately could lead to another financial crisis.

The regulator’s warning, however, fell on deaf ears. Competition among commercial banks has since shown no sign of abating. Rather it is likely to intensify down the road as the top four players ―Woori, Shinhan and Hana as well as Kookmin ― are scrambling to grab the covetous title of the leading bank.

The recent competitive pressure in the banking sector comes largely from Kookmin Bank that has been pursuing an aggressive expansion strategy under Euh Yoon-dae, chairman of the bank’s parent company, KB Financial Group.

A former president of Korea University with close ties with President Lee Myung-bak, Euh took the top post of the nation’s largest banking group in July last year. He was expected to spearhead the globalization of Korean banks based on his expertise in international finance.

But Euh has been more intent on expanding the group’s domestic operations than exploring new opportunities abroad. Besides the push to increase corporate loans, he launched campaigns to attract university students and retirement pension subscribers. He also added fuel to the overheating competition in the credit card industry by spinning off Kookmin’s card unit into a separate company in early March.

Last week, Euh justified his focus on the domestic market by saying that Korean banks, including Kookmin, are not ready for globalization. The greatest obstacle to globalization, he said, was the inability of bank officials to communicate in foreign languages. He added that Korean banks also lack the human resources, experience, information, networks and funding ability needed to move into foreign markets.

Under these circumstances, Euh argued, the most effective way to globalize the domestic banking industry would be the acquisition of foreign banks by Korean corporations ― for instance Samsung and LG groups ― that can mobilize funds at low costs in global capital markets.

Granted, Korean banks face many obstacles in promoting globalization. They are inferior to foreign banks in terms of personnel, management skills and financing. Nevertheless, there are ways they can promote globalization.

For instance, Korean banks can advance into developing countries by acquiring local banks and transplanting their management systems. Actually, some Korean banks have successfully established themselves in Vietnam and other Asian countries in this way.

Globalization is not an option but a must for Korean banks, given the already saturated domestic market. If the top four banks go all out to increase their share of this small, crowded market, they will end up doing harm not only to themselves but to the national economy. It is the last thing they should do.

What they need to do is to expand their operations in overseas markets under a carefully drafted long-term plan. They need to enhance core competencies, foster financial specialists, strengthen research capabilities and form an extensive network of business partners to promote globalization.