The investigative authorities examining the improper loan case involving former Chairman Son Tae-seung's relatives are now turning their focus toward the current management of Woori Financial Group and its bank. With the current bank president's term set to expire at the end of this year, ongoing pressure from investigative and supervisory authorities is casting uncertainty over the selection process for the next CEO.
According to financial circles on the 19th, although Woori Bank President Cho Byung-kyu's term expires at the end of the year, no public movement regarding the appointment of the next CEO has yet emerged. According to the governance best practice guidelines, the final candidate recommendation must be completed one month before the term expires, that is, by the end of this month. Since the Woori Financial Group board held its first Subsidiary CEO Recommendation Committee (SCRC) meeting on the 29th of last month, the appointment process has been proceeding in a low-key manner. While there is some expectation that the direction of the SCRC discussions may become clearer around the time of the regular board meeting on the 22nd, the situation remains uncertain.
This approach contrasts sharply with last year’s process, where the first SCRC meeting was immediately followed by the public release of the first candidate pool (longlist) and a swift appointment process. After former President Lee Won-duk’s resignation, the 2023 appointment process saw the longlist published right after the first SCRC meeting on March 24, followed by the announcement of the final candidate pool (shortlist) about two months later, culminating in the appointment of the final candidate (President Cho) in a timely manner.
The reason Woori Financial Group is maintaining a low-key stance in the next president selection is attributed to the fallout from the improper loan case involving former Chairman Son. Just the day before, the Financial Investigation Division 1 of the Seoul Southern District Prosecutors’ Office (Chief Prosecutor Kim Soo-hong) conducted a search and seizure of the offices of Woori Financial Group Chairman Lim Jong-ryong, President Cho’s office, and the loan-related departments at Woori Bank’s headquarters in connection with the improper loan case and subsequent measures. The prosecution had previously searched Woori Bank’s headquarters, Seolleung Financial Center, and the residences of those involved in the case. This additional search effectively shifts the investigative focus onto the current management.
In particular, President Cho is reportedly now classified as a suspect in this case. He is alleged to have failed to immediately report to financial authorities the illegal loan processes he became aware of after taking office, violating Article 12 of the Act on the Aggravated Punishment of Specific Economic Crimes ('Failure to Report').
Pressure from supervisory authorities is also ongoing. The Financial Supervisory Service (FSS) decided to extend the regular inspection of Woori Financial Group and its bank, which began on the 7th of last month, by one week. For Woori Financial Group, this means undergoing supervisory inspections for about five months, including on-site inspections in June related to former Chairman Son’s improper loan case, a re-inspection in August, the regular inspection in October, and now this extension.
The FSS also issued an unusual statement regarding the prosecution’s additional search and seizure the day before. The FSS stated, "We have been closely cooperating with the prosecution by promptly providing necessary materials for the investigation related to the improper loan case," and added, "We will continue to actively cooperate to ensure the investigation proceeds without disruption."
With investigative and supervisory authorities targeting the current management, many analysts believe a red light has been lit on President Cho’s path to reappointment, which is the biggest point of interest in this president selection process. To make matters worse, internal troubles continue. Woori Bank recently suffered a financial accident involving 2.5 billion KRW due to the submission of false documents by an external party. This marks the fourth financial accident this year. Despite repeated calls for strengthening internal controls, little change has been observed.
As for Chairman Lim, opinions remain divided. Some interpret that the issue of his position has been settled for now. Chairman Lim himself drew a line on resignation during last month’s National Assembly audit and expressed his intention to focus on improving Woori Financial Group’s organizational culture. A financial industry insider said, "As far as I know, the issue regarding Chairman Lim has effectively been resolved."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
