[The Editors' Verdict] Banks, Don't Give Excuses for Government Intervention

Asia Economy ran a special series titled [Shaken Financial Leadership] from the 30th to the 2nd. The content was as follows. There was an era of government control (Gwanji, 官治), and during the Lee Myung-bak administration, the era of politics (Jeongchi, 政治) arrived. Under the Moon Jae-in administration, due to President Moon's directive of 'non-interference in private company personnel matters,' the authority of financial supervisory authorities plummeted. The era of internal governance (Naechi, 內治), where a company without an owner acts as its own master, fully took hold. It is no coincidence that during this period, the Lime scandal, the overseas interest rate-linked derivative-linked fund (DLF) scandal, and the Optimus scandal occurred one after another. This was due to the chairman and bank president excessively pursuing performance, neglecting the fundamental financial principle of 'trust.'

"Financial companies are different from general companies. General companies can freely compete within the law and make money. However, excessive performance competition aimed at making a lot of money is poison for financial companies. It is necessary for financial companies to always feel that the supervisory authorities are watching them closely from behind. To the extent that they feel a sting on the back of their heads. This is why the authority of financial supervisory authorities must be maintained at a very high level." This was said by a former financial bureaucrat who is now retired.

There is much discussion surrounding the governance of financial companies. It is said that government control (Gwanji, 官治) is the problem. However, government control is inevitably present. Finance is a regulated industry. There is only good government control and bad government control.

Recently, the financial authorities blocked Cho Yong-byoung, chairman of Shinhan Financial Group, from serving a third term. Im Jong-ryong, a former Financial Services Commission chairman and bureaucrat, was appointed as chairman of Woori Financial Group, which has no government shares, through the chairman recommendation committee's verification. Lee Seok-jun, a former head of the Office for Government Policy Coordination and a member of Yoon Seok-yeol’s presidential campaign, became chairman of NongHyup Financial Group.

Out of 33 outside directors of the four major financial holding companies, 28 (85%) are said to have their terms expire this March. Rumors are already widespread that people from Yoon Seok-yeol’s presidential campaign or the transition committee will become outside directors of financial companies. Criticism arises that the government is inserting its own people under the pretext of improving financial company governance and correcting unreasonable internal governance.

How should this be viewed? Should we support government control that prevents internal governance? Is it natural that a company without an owner is controlled by political power anyway? Even so, is it desirable for political power to strongly influence finance?

Despite many disputes, KB Financial has not seen intervention from financial authorities since Chairman Yoon Jong-kyu took office. This is because factional conflicts were resolved and the succession structure was clearly established. Shinhan Financial also had internal governance issues, but the authorities dare not try to insert anyone. The CEO candidate pools for KB Financial and Shinhan Financial are clear. People think, 'One of those three or four candidates will probably become CEO.'

Hana Financial had internal governance issues under former Chairman Kim Jung-tae. He was criticized for not making efforts to cultivate successors during his four terms. Woori Financial has many problems. From factional conflicts between Hanil and Commercial Bank to a bureaucratic mindset and archaic corporate culture, there are no signs of improvement. How much change can Im Jong-ryong, the appointed chairman of Woori Financial, actually bring?

Ultimately, if a financial company operates properly without any problems, there is no room for intervention by financial supervisory authorities. Because financial companies cause problems in some form, authorities have the desire to intervene, and this is exploited to justify rampant government control intervention. To prevent this, financial companies must not give such excuses.