Woori Bank under Jo Byung-kyu Ultimately Faces Collapse... Burden of Being Turned into a Suspect in the 'Unfair Loan Scandal'

Woori Financial Board Judges Continued Operations Impossible
Prosecutors and Financial Supervisory Service Conduct Comprehensive Raids on Chairman and Bank President Offices
Allegations of Relatives' Improper Loans, Former Chairman Sohn Tae-seung Also Faces Arrest Warrant
Next Week's Outline of Next Woori Bank President Candidates... Internal and External, Interest in Hanil and Commercial Backgrounds

Jo Byung-kyu, the president of Woori Bank, is expected to be replaced due to the fallout from improper loans related to relatives of former Woori Financial Group Chairman Sohn Tae-seung. This week, the prosecution conducted a search and seizure operation on the holding company and the bank, and requested an arrest warrant for former Chairman Sohn.

According to financial circles on the 22nd, directors of Woori Financial Group held a regular board meeting at the Woori Financial headquarters in Jung-gu, Seoul, in the afternoon and reportedly reached a consensus that President Jo’s reappointment was not possible. It is said that all seven outside directors, who also serve as members of the subsidiary CEO candidate recommendation committee, conveyed this intention. President Jo, who took over the remaining term of former President Lee Won-duk and has led Woori Bank since July last year, will have his term end on December 31.

On that day, the board apparently judged that it was no longer possible for President Jo to perform his duties after he was turned into a suspect in connection with allegations of improper loans amounting to about 35 billion KRW related to relatives of former Chairman Sohn. Woori Bank is suspected of having provided improper loans to corporations and individual business owners related to Sohn’s relatives. Furthermore, recent prosecution investigations revealed additional improper loans amounting to 7 to 8 billion KRW.

The prosecution and the Financial Supervisory Service (FSS) believe that President Jo was aware of the improper loan process but did not immediately report it to the financial authorities. Accordingly, the prosecution has changed President Jo’s status to that of a suspect for violating Article 12 of the Act on the Aggravated Punishment of Specific Economic Crimes, which concerns the duty to report.

Shortly after the Woori Financial Group board’s decision became known, the prosecution coincidentally announced that it had requested an arrest warrant for former Chairman Sohn. The Seoul Southern District Prosecutors’ Office Financial Investigation Division 1 (Chief Prosecutor Kim Soo-hong) applied charges of breach of trust under the Act on the Aggravated Punishment of Specific Economic Crimes. Former Chairman Sohn was summoned for questioning for 20 hours over two days from the 20th to the 21st. The prosecution believes that he was involved in the improper loan process related to his relatives.

So far, the prosecution and the FSS have exerted comprehensive pressure to uncover the improper loan allegations. The FSS conducted spot inspections related to improper loans in June and, starting from October, advanced the regular inspection planned for next year by one year. Additionally, the usual six-week regular inspection period was extended by one to two weeks.

Having received the results of the FSS’s spot inspections, the prosecution is accelerating its investigation. The brother-in-law of former Chairman Sohn, who is at the center of the improper loan case, was indicted while in custody in September, and in October, a former head of a Woori Bank division was indicted and detained. On the 18th, former Vice President Sung Mo was also indicted and detained on charges of breach of trust under the Act on the Aggravated Punishment of Specific Economic Crimes.

The prosecution has also significantly expanded the scope of the search and seizure to include the offices of the chairman of Woori Financial Group and the president of Woori Bank. The three-day search and seizure operation from the 18th aimed to examine not only loan-related documents but also the process of recognizing the improper loan case and failing to immediately report it to the financial authorities. In the first search and seizure on August 1, the prosecution targeted the Woori Bank headquarters’ loan supervision department, as well as the Sindorim Financial Center in Guro-gu and the Seolleung Financial Center in Gangnam-gu.

The next Woori Bank president candidate to be revealed next week... Candidate pool to remain 'confidential'

The candidate to lead Woori Bank following President Jo is expected to be revealed sometime next week. According to the governance best practices suggested by the financial authorities, the candidate must be finalized by the end of November.

Inside and outside Woori Financial, the following individuals are being mentioned as candidates for the next president: Yoo Do-hyun, Executive Vice President of Woori Bank’s Management Planning Group; Jung Jin-wan, Vice President of the SME Group; Park Jang-geun, Vice President of Woori Financial Group’s Risk Management Group; Lee Seok-tae, President of Woori Financial Savings Bank; Park Wan-sik, CEO of Woori Card; and Kang Shin-guk of Woori PE Asset Management.

However, unlike last year when four candidates were publicly disclosed, Woori Financial plans to conduct the selection process strictly confidentially this year. A Woori Bank official explained, “There is a strong atmosphere of maintaining strict confidentiality regarding this year’s bank president selection process,” adding, “Neither the long list nor the short list will be disclosed.”

The key point to watch going forward is whether the final presidential candidate will be an internal or external candidate. If internal, it will be of interest whether the candidate comes from Hanil Bank or from Commercial Bank.

Since merging with Hanbit Bank in 1998, Woori Bank has had five presidents from Commercial Bank, three from Hanil Bank, and three external presidents. The Commercial Bank alumni include the inaugural president Kim Jin-man, as well as Lee Soon-woo, Lee Kwang-gu, Kwon Kwang-seok, and Jo Byung-kyu. Lee Jong-hwi, Sohn Tae-seung, and Lee Won-duk were from Hanil Bank. External presidents who led Woori Bank include Lee Deok-hoon, Hwang Young-gi, and Park Hae-chun.

Among the rumored candidates, Vice President Jung Jin-wan is from Hanil Bank, while Vice Presidents Park Jang-geun and Yoo Do-hyun are from Commercial Bank.