Director Lee Bok-hyun with 6 Months Left in Term
Financial Holding Companies and Banks Face Strengthened Supervision
Woori and Financial Sector on High Alert
The financial sector is abuzz with the Korea Financial Supervisory Service's (FSS) unprecedented personnel reshuffle. On the 10th, Lee Bok-hyun, Governor of the FSS, executed a bold move by replacing 74 out of 75 department heads, excluding the Director of the Financial Market Stabilization Bureau. Although the official rationale was a merit-based appointment breaking away from seniority-centered practices, analysts interpret this as Lee’s effort to tighten discipline both inside and outside the organization during the remaining six months of his term. The appointment of a veteran bank examiner, known as the ‘enforcer of financial authorities,’ to a prominent position reflects Lee’s determination to maintain a stringent market supervision stance.
Governor Lee expanded the department head structure from the original first batch of public recruitment (joined in 2000) to include up to the fourth batch, and even appointed members from the fifth batch as department heads, aiming for a generational shift within the organization. The only person retained was Lee Jin, Director of the Financial Market Stabilization Bureau. This is interpreted as a measure to stably manage the unstable financial market situation, often referred to as the ‘12·3 emergency decree.’
The financial sector is paying close attention to the appointment of Kim Nam-tae as Director of the Bank Examination Division 1, which oversees the four major financial groups and banks: KB, Shinhan, Hana, and Woori. In June, Governor Lee promoted Kim, who had been serving as a liaison officer at the Chungnam Provincial Government, to Director of the Financial Investment Examination Division 3, and then advanced him to this key position within six months. Kim led inspections of KB Financial Group in 2021 and Woori Financial Group in 2022, and successfully handled related issues as head of the Bank Examination Division 1’s Inspection Planning Team in 2023. He is regarded as an expert on the four major financial groups within the FSS.
The FSS’s biggest current issue is the inspections of Woori Financial Group and KB Financial Group and the subsequent measures. Woori Financial Group is on high alert for possible strong sanctions from the FSS ahead of the announcement of the regular inspection results related to improper loans involving relatives of former Woori Financial Group Chairman Sohn Tae-seung. Although the prosecution’s arrest warrants for former Chairman Sohn were dismissed twice, providing some relief, avoiding sanctions from the FSS is expected to be difficult.
Director Kim is reviewing Woori Financial Group’s internal control system and records related to improper loans, leaving open the possibility of approaching the matter from a different perspective than before. There is also a possibility of taking stringent measures on specific issues.
The FSS is reportedly planning to hold current management accountable, including Chairman Lim Jong-ryong of Woori Financial Group and President Cho Byung-kyu of Woori Bank. The prosecution has also started investigating President Cho as a suspect, and depending on the investigation results, Chairman Lim may also be reclassified as a suspect. On the 28th, Governor Lee indicated a strong response by stating, “It has been confirmed that Sohn Tae-seung’s relatives’ illegal loans were executed during the tenures of the current Woori Financial Group Chairman (Lim Jong-ryong) and current President (Cho Byung-kyu).” The FSS plans to announce the inspection results for Woori Financial Group next month.
KB Financial Group is also on edge. The FSS has been focusing on the insolvency issues of Bukopin Bank, an Indonesian subsidiary, and conducted regular inspections of KB Financial Group and Kookmin Bank, including investment suitability. KB Financial Group is expected to decide its response strategy after observing the level of sanctions imposed on Woori Financial Group.
Woo Bin, Legal Times Reporter
※This article is based on content supplied by Law Times.
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