[Kim Byunghwan 3 Months]② 'Timef·Woori Financial Scandal' Leadership Test

Chairman Kim Byun-hwan Faces Challenges Upon Inauguration
Admits Financial Authorities' Responsibility in TimeF Incident
Adopts Cautious Stance on Woori Financial Unfair Loan Scandal

Financial Services Commission Chairman Kim Byung-hwan faced major financial incidents immediately after taking office, including the large-scale settlement delay crisis at e-commerce companies Tmon and Wemakeprice (Timep) and the improper loan scandal involving relatives of former Woori Financial Group Chairman Sohn Tae-seung. As the newly appointed head of the financial authorities, he was put to the test to take responsibility for investigating and coordinating follow-up measures for these unprecedented financial accidents.

The Timep incident, with damages amounting to 1.3 trillion won, was challenging from the start. Chairman Kim, who even skipped his inauguration ceremony, stated that the financial authorities could not be free from responsibility for the incident and pledged to swiftly manage the situation and support the affected companies through consultations with related ministries. Within the inter-ministerial discussion body including the Ministry of Economy and Finance, Ministry of SMEs and Startups, Ministry of Trade, Industry and Energy, Ministry of the Interior and Safety, and the Financial Supervisory Service, the Financial Services Commission took charge of financial support and reforming the management and supervision system for Timep’s tenant companies.

About two weeks after the related ministries’ task force (TF) meeting, on September 9, the Financial Services Commission announced institutional improvement measures, which included the introduction of an obligation for electronic payment gateway (PG) companies to separately manage all unsettled funds and the establishment of phased measures such as corrective orders, business suspension, and registration cancellation if PG companies fail to comply with management guidelines or separate management obligations.

The Financial Services Commission has completed preparations to propose amendments to the Electronic Financial Transactions Act to the National Assembly, reflecting opinions collected from public hearings. A financial authority official said, “Chairman Kim conducted multiple internal discussions and reviews, and when inter-ministerial coordination with the Ministry of Economy and Finance was necessary, he personally resolved the issues.”

Woori Financial Improper Loan Scandal, a Cautious Approach

Alongside the Timep incident, evaluations of the handling of the improper loan scandal involving relatives of former Woori Financial Group Chairman Sohn Tae-seung, which shook the financial sector, are somewhat mixed. Chairman Kim initially remained reserved and maintained a cautious stance. Some speculated that he refrained from evaluation and comments because Im Jong-ryong, the current chairman of Woori Financial Group, is a senior from the Ministry of Economy and Finance who previously served as Financial Services Commission Chairman. His approach contrasted with that of Financial Supervisory Service Governor Lee Bok-hyun, who had taken a hardline stance at the time, as Kim expressed doubts about whether the current management was willing to root out the problem.

His position was only confirmed at an unannounced press briefing held just before the Chuseok holiday on September 12. Regarding the rising calls for responsibility of Im Jong-ryong, chairman of Woori Financial Group, and Cho Byung-kyu, president of Woori Bank, over the improper loans, he said, “This is an issue that greatly undermines public trust in the financial sector and is a matter of very serious concern,” adding, “I believe the current Woori Financial management also feels a deep sense of responsibility regarding this financial accident.” However, he avoided direct comments on the current management’s tenure.

Mentions of the Woori Financial improper loan scandal were absent from the National Assembly audit materials that concluded on the 24th. This is interpreted as reflecting the basic view that governance of individual financial companies is a matter for their boards of directors and shareholders’ meetings. In response to questions raised during the audit, he pointed out that Woori Bank did not report to the financial authorities in a timely manner and stated, “The authorities’ interpretation based on fundamental laws and regulations takes precedence.”

Financial Services Commission Chairman Kim Byung-hwan and Financial Supervisory Service Chairman Lee Bok-hyun are attending the comprehensive audit of the Financial Services Commission and the Financial Supervisory Service held at the National Assembly's Political Affairs Committee on the 24th. Photo by Kim Hyun-min

Unforeseen Chain of Financial Accidents... Leadership Test 'Ongoing'

After three months in office, Chairman Kim’s leadership is likely to remain under test due to unforeseen financial accidents. Follow-up measures have yet to be implemented for issues such as the Timep incident and the improper loan allegations at Woori Bank, as well as the incomplete sales prevention measures for the Hong Kong H-Index equity-linked securities (ELS), one of the biggest banking sector issues since the beginning of the year.

Moreover, he is not free from controversy over the so-called 'Han Dong-hoon People Power Party leader attack instigation' allegations involving former senior presidential secretary Kim Dae-nam’s parachute appointment as standing auditor at SGI Seoul Guarantee Insurance. Additionally, he is perceived to be avoiding direct answers on sensitive matters such as the Deutsche Motors stock manipulation allegations and the Sambutogen scandal.

A financial sector official who has worked with Chairman Kim said, “As a bureaucrat, he speaks carefully while considering the market impact of his statements,” adding, “Over time, I expect him to express his position more clearly as Financial Services Commission Chairman.”