Lee Bok-hyun "No Government Intervention... CEO Risk Management Is a Duty, Not Discretion"

7th at Bank Federation Hall 'Research Institute Heads Meeting'

Financial Supervisory Service Governor Lee Bok-hyun is delivering opening remarks at the Financial Supervisory Service Governor-Research Institute Heads Meeting held at the Bankers Hall in Jung-gu, Seoul on the 7th. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Song Seung-seop] Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), reiterated that there was no intervention by the authorities regarding the recent controversy over government control of financial sector CEOs. However, he emphasized that managing risks arising from CEOs is "a duty, not a discretion."

Governor Lee met with reporters on the 7th after the 'Research Institution Heads Meeting' held at the Bankers' Hall in Jung-gu, Seoul, stating, "What is certain is that there has been no intervention in CEO appointments like in the authoritarian era," and explained, "In the case of NongHyup Financial, I understand that the Central Association holds decision-making shares, but we have never given opinions or used anti-market methods."

Recently, NongHyup Financial activated its Executive Candidate Recommendation Committee, leading to speculation that Son Byung-hwan, Chairman of NH NongHyup Financial Group, would be replaced. Former Prime Minister's Office Coordinator Lee Seok-jun is being mentioned as the next chairman. Lee was considered the first recruit in President Yoon Seok-yeol's presidential campaign. As figures connected to the administration have been rumored for other financial companies, criticism has arisen that government-controlled finance might be making a comeback.

Governor Lee added, "If you only look at the conclusion, you might criticize the financial authorities, but we have not been involved and have maintained a consistent stance," and further explained, "(Regarding CEO appointments) it is appropriate to ask the Central Association, and we do not even know through what process it was made."

However, he mentioned that risk management of CEOs is necessary. Governor Lee said, "For example, when a financial company lends to a corporation, who the CEO is is a very important factor," and questioned, "Isn't it stranger not to check whether the CEO of the financial institution as a counterparty is excellent or has negative risks?" He then drew a clear line, saying, "In that sense, managing CEO risks is the FSS's duty, not a discretion."

Regarding the financial authorities' message to refrain from raising deposit interest rates and to review loan interest rates, he said, "In principle, it is right not to intervene in the price determination function through the efficient operation of the market," but pointed out, "Rational decisions by economic agents can have external effects on the market." This means that even if a financial company's interest rate hike is a reasonable judgment, if it adversely affects the capital market and liquidity, the financial authorities must play a role.

He continued, "The short-term financial market and the overall market situation are changing significantly, so we imposed short-term restrictions accordingly," and said, "Depending on how the market situation develops, there may be opportunities to express different positions."

Regarding the recent interbank bond transactions among banks, he said, "It is unprecedented and an exceptional situation, and there is a consensus that the issuance of bank bonds should be somewhat restrained," adding, "I think there are various opinions, and discussions are still ongoing."