Global Financial Market Risk Review Meeting
Controversy Over Son Tae-seung's Severe Disciplinary Action Called 'Political External Pressure' by Some
"We Will Absolutely Block External Pressure," Strong Critical Remarks Pour Out
[Asia Economy Reporter Song Seung-seop] Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), emphasized that “basically, there is no political or any other external pressure” regarding the severe disciplinary action of a written warning issued to Sohn Tae-seung, Chairman of Woori Financial Group. This was a pointed criticism against the view held by some that there was a ‘political external wind’ surrounding Sohn Tae-seung’s Lime Fund disciplinary case.
On the 10th, Governor Lee met with reporters after the ‘Meeting for Global Financial Market Risk Assessment and Support for Overseas Expansion of Financial Companies’ held at Lotte Hotel in Sogong-dong, Seoul, and stated, “No matter what external pressure may come in the future, I want to say that I will confront it head-on.”
The Financial Services Commission (FSC) decided on the previous day to issue a written warning disciplinary action to Chairman Sohn, holding him responsible for the Lime Fund incident, which caused massive consumer damage. A written warning is the third highest level of disciplinary action among financial company executive sanctions. Receiving a written warning makes reemployment in financial companies impossible for several years. Sohn’s term ends in late March next year. Some have raised suspicions that there might be political external pressure to change the head of the financial sector, coinciding with the resignation of the BNK Financial Group chairman.
Governor Lee said, “Even if I lack other expertise, standing up against external pressure is a field I have specialized in for over 20 years,” and reiterated, “There is a fundamental principle that autonomy must be respected based on efficient and rational governance of financial companies and respect for market principles, so if there is any movement that undermines that, I will absolutely block it.” He added, “(FSC Chairman Kim Ju-hyun) shares the same view.”
He continued, “There were reports implying that the Lime incident was something that the headquarters could not have known about since it happened at frontline branches, so I want to clarify,” and criticized, “I recognize the Lime incident as a serious consumer rights violation deliberately caused despite the headquarters’ awareness of specific problems.” He also pointed out, “Although there were various opinions on issues during the FSC agenda subcommittee discussions and full meetings, no one thought this case was insignificant.”
When asked if the FSC would also appear in court alongside the FSS, which is currently litigating over the Derivative Linked Fund (DLF) case, if Chairman Sohn files an appeal lawsuit, he replied, “Everyone knows well that problems in various financial accidents have been revealed.” Governor Lee said, “Unlike in the past, now is a time when financial authorities and institutions must closely cooperate regarding rapid market fluctuations,” and added, “I believe the party involved will make a wiser decision.”
Regarding criticism that the financial authorities bear responsibility for reversing the decision on Heungkuk Life Insurance’s new capital securities call option, he responded, “We will make efforts to improve in the future,” but countered, “Considering the rapid decision-making and uncertainties of market participants, we have long prepared for various scenarios.” Recently, criticism arose in political and financial circles questioning why there was no swift response despite prior knowledge of the insurance industry’s non-exercise of call options.
Governor Lee explained, “Conversely, if we had been overly proactive in seeking opinions or induced certain actions, there might have been a different kind of criticism,” and said, “We discussed such options internally with the FSC, FSS, and Ministry of Strategy and Finance.” This implies that they were not passive or inactive without any discussion.
Regarding the situation where securities firms continue to roll over funds with ultra-short-term instruments even after the government took measures to stabilize the money market, he explained, “We are monitoring very closely by type, reviewing daily and weekly statuses through a real-time monitoring system.” Governor Lee added, “We are actively involved to prevent corporate bonds from freezing and are making efforts to act as a catalyst,” and elaborated, “We are considering including the securities industry’s commitment to assist with project financing (PF) asset-backed commercial paper (ABCP) because we believe a response to the real estate market is necessary.” However, on the controversy over moral hazard of companies receiving funds, he said, “We cannot avoid holding them somewhat accountable.”
When asked about the possibility of the FTX exchange liquidity crisis spreading to the domestic financial market, Governor Lee said, “I have requested the team to conduct an inspection.” He added, “Regarding virtual assets, we focus on risks related to our so-called traditional financial markets. It is difficult to publicly state what we will do about virtual asset exchanges or virtual assets themselves.”
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