Lee Bok-hyun "Woori Bank, Another Case of Unfair Loans"...Increasing Pressure

The position of Chairman Im Jong-ryong and the current management of Woori Financial Group and Woori Bank is rapidly narrowing. Following the investigation authorities' search and seizure of Chairman Im's office in connection with the improper loan case involving former Chairman Sohn Tae-seung's relatives, the supervisory authorities have detected signs of additional illegal loans made during Chairman Im's tenure. As the supervisory authorities have declared a 'zero-tolerance policy,' it is expected that the issue of Chairman Im's position, which had quieted down, will resurface.

According to the financial sector on the 29th, Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), met with reporters after a meeting with the chairpersons of financial holding companies' boards at the Bankers' Hall in Jung-gu, Seoul, the previous afternoon, and stated, "During the inspection of Woori Financial Group, it was confirmed that cases similar to the improper loan incident involving former Chairman Sohn occurred during the tenure of the current CEO and chairman," adding, "The inspection results will be announced in December."

Financial Supervisory Service Governor Lee Bok-hyun is surrounded by reporters and answering questions as he enters the Bankers Hall in Myeong-dong, Seoul, on the 28th to attend the meeting between the FSS Governor and the chairpersons of bank holding companies' boards. Photo by Heo Young-han

Thus, the improper loan case involving former Chairman Sohn appears to have reached a new turning point. Initially, the issue expanded from the improper loan case involving affiliates during former Chairman Sohn's tenure to allegations that the current management delayed reporting the matter to the supervisory authorities despite being informed. Now, signs of illegal loans made during the current management's tenure have been detected. This situation allows for direct internal control responsibility to be attributed to the current management.

As the supervisory authorities target the current management, concerns about governance risks at Woori Financial Group are reigniting. With Woori Bank President Cho Byung-kyu having conveyed his intention not to seek reappointment to the board, public attention is focusing on the position of Chairman Im, the CEO.

Until the national audit at the end of last month, Chairman Im's future seemed to be settled in favor of retention, but recently, this trend appears to have changed significantly. The financial sector views the upcoming disclosure of the FSS inspection results next month as a potential turning point regarding Chairman Im's position. A financial sector official said, "Although Chairman Im has dismissed concerns about his position, there are still those who believe he bears significant responsibility," adding, "The Woori Financial Group board also seemed confused and unable to find direction." Another official said, "This is essentially targeting Woori Financial Group's governance," and "It is seen as a final ultimatum."

However, as the entire group governance structure, including the president and chairman of Woori Financial Group, begins to shake, voices of concern are growing. Particularly, worries are high regarding Woori Financial Group and Woori Bank, the two main pillars of the group. A Woori Financial Group official said, "Everyone has pros and cons, but many employees had expectations for the somewhat changed corporate culture since Chairman Im's appointment," adding, "It makes me realize how strong the external pressures are." Another official expressed concern, saying, "If the CEO is replaced after the president has been changed, further confusion is inevitable," and "It could trigger a revival of long-standing issues such as external pressures and internal conflicts."

Experts agree that while sanctions against responsible CEOs and others are inevitable, establishing a system is more important than punishment. Professor Kim Dae-jong of Sejong University's Department of Business Administration said, "Basically, those who bear any responsibility for the former Chairman Sohn's case should be held accountable," but added, "It is necessary to focus on institutional improvements to prevent recurrence rather than punishment." Kim Deuk-ui, head of the Financial Justice Solidarity, stated, "This should serve as an opportunity to comprehensively refine credit regulations concerning relatives."