A bank run occurs when a lot of customers, fearing the bank may turn insolvent, decide to withdraw their deposits at the same time. But what if angry depositors, feeling cheated by a bank, decide to demand cash or transfer their money to a different financial institution?

There might not be much chance of such an anger-driven bank run happening, but it is not theoretically impossible, given what one harebrained bank did to its customers.

Shinhan Bank demanded higher rates of interest on their loans to depositors with secondary education, while charging lower rates on those with a doctorate or a master’s degree. It simply ignored individual creditworthiness when determining the rates to be applied on its loans. What is even more infuriating is that this discriminatory loan policy obtained approval from the Financial Supervisory Service.

According to a report from the state watchdog Board of Audit and Inspection, Shinhan added the level of education as one of the criteria to be used in determining lending rates and obtained approval from the Financial Supervisory Service in April 2008. The state watchdog said this discriminatory policy, which had lasted until May this year, gave the bank extra profits during the 2008-11 period. In addition, it said, 14,138 requests for unsecured loans, or 31.9 percent of the total, were turned down simply because the applicants’ levels of education were low.

Shinhan offered a lame excuse when it admitted to using education as a criterion for lending rates. It said it stopped using it after customers had been with the bank six months ― a period which it said was long enough to determine their creditworthiness without reference to education.

Many, including the victims, have good reason to wonder if it wanted to maximize its profits by discriminating against its customers. The bank could have obtained information on their credit standings from credit-evaluation agencies. But it didn’t.

The state watchdog says Shinhan was the only bank to use a borrower’s level of education as a criterion for creditworthiness. But it says that Shinhan, Woori and two other banks made unwarranted profits by resorting to other discriminatory and other inappropriate surcharges on loans ― 242.7 billion won in 2009, 482.7 billion won in 2010 and 329.6 billion won in 2011. One such example was the application of higher rates on loans to single borrowers than to married ones.

Even more serious are allegations that Kookmin Bank doctored loan documents. To determine whether or not falsification was limited to Kookmin Bank, the Financial Supervisory Service demanded all other commercial banks check their loan documents and report their findings.

The case came to the fore when a group of borrowers recently filed a complaint with police that a Kookmin branch tampered with documents to demand that borrowers pay back loans ahead of maturity dates. The police say they are investigating an allegation that maturity dates were falsified on the documents submitted to obtain loans to pay for apartment purchases in installments.

The same Kookmin branch is also accused by one of the borrowers of inflating the amount of money loaned to him, from 24 million won to 192 million won, by tampering with the loan document. The signature affixed to the document was reportedly confirmed not to belong to the borrower.

All these loan scandals are cropping up at a time the Fair Trade Commission is conducting an investigation into an allegation that commercial banks colluded with brokerages in fixing the rates of certificates of deposit with three-month maturity ― the benchmark for floating rates ― to increase their profits.

Now the question is: What was the financial watchdog doing when widespread fraud was threatening to shake the foundation of the banking industry? What would it say to a claim that it turned a blind eye to the banks when they were engaged in massive fraud?

If no action is taken to restore public confidence in the banking industry, customers may move their money away from banks. The administration needs to begin devising laws to protect bank customers immediately.