Eyes on Kim Byunghwan... Financial Holding Chairpersons Meeting on the 30th

Relay Meeting at Bank Federation on the Morning of the 30th
'Financial Accidents, Trust Recovery, Internal Control, New Growth Engines...' Expecting Candid Criticism
Before the Meeting, Shinhan, KB, and Others Confirm Participation in Pilot Operation of 'Accountability Structure'

Financial Services Commission Chairman Kim Byung-hwan is giving a briefing on household debt at the Government Seoul Office in Jongno, Seoul, on the 6th. Photo by Jo Yong-jun jun21@

Financial Services Commission Chairman Kim Byung-hwan will conclude the series of relay meetings with the financial sector that he has been conducting since his inauguration, with a final meeting with the heads of financial holding companies. Since August, he has held seven sector-specific meetings with banks, securities, insurance, savings banks, and asset management companies, emphasizing the restoration of trust shattered by illegal and unfair practices and the strengthening of industry competitiveness. Accordingly, he is expected to bring up agendas encompassing the entire holding companies and their affiliates and continue his requests.

According to the financial sector on the 27th, the Financial Services Commission will hold the final meeting on the morning of the 30th at the Bankers Association in Myeongdong, Seoul, chaired by Chairman Kim. The meeting will be attended by financial holding company chairpersons including Yang Jong-hee of KB Financial Group, Jin Ok-dong of Shinhan Financial Group, Ham Young-joo of Hana Financial Group, Lim Jong-ryong of Woori Financial Group, and Lee Seok-jun of NongHyup Financial Group.

Chairman Kim began meeting with CEOs starting with the banking sector on the 20th of last month, followed by the credit specialty sector on the 22nd, the insurance sector on the 28th, and the financial investment sector on the 29th. This month, he met with CEOs of the savings bank sector on the 2nd, the asset management sector on the 5th, and the mutual finance sector on the 9th, using these occasions as introductory meetings and to explain policy directions.

First, Chairman Kim is expected to urge financial holding companies, as the control towers of their financial affiliates, to actively work toward restoring trust in the entire financial industry, which has lost credibility due to frequent financial accidents. In particular, as the improper loan scandal involving relatives of former Woori Financial Group Chairman Sohn Tae-seung has emerged as the biggest issue in the financial sector, he is likely to call for efforts to improve internal control systems and governance structures. He previously expressed his stance for the first time at a press conference held on the 12th, stating, “As the Financial Services Commission Chairman, I have very serious concerns. The current management must also feel a deep sense of responsibility regarding this financial accident.”

Additionally, since this is the first time major commercial banks’ CEO appointment procedures have begun following the implementation of the governance best practices for financial holding companies and banks, he is expected to request that management succession be conducted through transparent and fair procedures. The best practices require that the management succession process be initiated at least three months before the CEO’s term expires through the nomination committee for executives.

He is also expected to urge active cooperation and fundamental structural improvements on key sectoral issues that he has mentioned as top priorities since his inauguration, such as household loan management, smooth landing of real estate project financing (PF), support for small business owners and self-employed individuals, and soundness of the secondary financial sector. Chairman Kim previously said at a meeting with bank CEOs, “As bank profits increase, social controversies are arising. We need to seriously consider why such criticism continues.” Regarding household debt management, he also urged, “Please establish a system based on autonomous repayment capacity, that is, the Debt Service Ratio (DSR).”

Since this meeting gathers financial holding company chairpersons, efforts to enhance the competitiveness of the financial industry are likely to be one of the main agendas. There will likely be calls to break away from the traditional revenue structure reliant on conventional operations and to build new growth models. In fact, Chairman Kim criticized at the banking sector meeting that banks must move away from the traditional business model dependent on interest rate margins and the domestic market and actively respond to the demands of the times to create a sustainable growth model.

At the savings bank sector meeting, he pointed out the need to soberly reflect on whether they have chosen the easy path relying on the real estate market rather than pursuing innovation to fulfill their original roles. At the securities industry meeting, he also criticized the focus on short-term profits, which has undermined market trust.

Meanwhile, ahead of this meeting, financial holding companies have concretized moves to prepare the ‘Accountability Structure Map’ to be fully introduced from January next year. The financial authorities are accepting applications for pilot operation of the Accountability Structure Map until the 31st of next month. Shinhan Bank submitted its ‘Internal Control Accountability Structure Map’ to the financial authorities on the 23rd and became the first to participate in the pilot operation. KB Kookmin Bank also announced its participation in the pilot operation and the establishment of the ‘KB Accountability Management Office.’