The prosecution will soon launch a large-scale investigation into irregularities at 11 corrupt savings banks. They include five of the seven banks that were suspended Sunday for capital shortage and the six banks that avoided suspension of operations despite their lower-than-required capital adequacy ratios.

The investigation will zero in on the controlling shareholders of the mismanaged banks who abused customer deposits. They are suspected of either having taken out huge illegal loans from their own banks for investment in dubious projects or having pressured bank officials to extend loans to their acquaintances beyond the legal limit.

For instance, one suspended bank extended loans amounting to 640 billion won, or nearly 70 percent of its total assets, to two property development projects. It violated the law that bans a bank from lending more than 20 percent of its equity capital to a single borrower. The bank’s owner is suspected of having been involved in shady deals with promoters of the projects.

In another case, a bank provided some 98 billion won in illegal loans to a borrower against collateral worth a mere 1.2 billion won. The borrower turned out to be an acquaintance of the bank’s chairman.

These and other cases demonstrated that the main culprits behind the long drawn-out mess at savings banks were their reckless controlling shareholders. Hence a stringent crackdown on these unethical financiers is necessary to normalize the sector.

But bringing the greedy bank owners to justice cannot prevent a recurrence of similar problems. Hence, an opposition lawmaker proposed Wednesday an ownership ceiling on controlling shareholders of savings banks to prevent them from wielding too much influence.

Kim Seok-dong, chairman of the Financial Supervisory Commission, said he would positively study the proposal as the insolvency of the troubled banks was mostly attributable to moral hazard among bank owners. In our view a drastic measure is needed to ensure that the sector does not fall into crisis again.

In this vein, it is necessary to reform the outside director system of savings banks as the regulator’s recent sweeping inspection of the sector showed that outside directors provided nothing more than a rubber stamp at most of the banks.

Under the current law on corporate governance, controlling shareholders are allowed to handpick outside directors. Hence, this law needs to be rewritten to exclude them from the outside director recommendation committees of their companies. This exclusion would help make outside directors more independent, enabling them to keep unscrupulous bank owners in check.