[Q&A] Lee Bok-hyun "Sympathizes with Lee Jae-yong's Initiative... Supports Samsung Life Subsidiary Inclusion and SDI Capital Increase"

Press Briefing on the 19th
On Acting Prime Minister Choi Sang-mok's Right to Request Reconsideration of the Commercial Act
"Sharing the Same Mindset of Following the President's Instructions"

On the 19th, Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), stated, "We sympathize with Chairman Lee Jae-yong of Samsung Electronics' initiative, and we will support any areas where the FSS can assist during the process of incorporating Samsung Life Insurance into (Samsung Fire & Marine Insurance) as a subsidiary and the Samsung SDI capital increase."

When asked whether he had communicated with Acting Prime Minister Choi Sang-mok regarding the re-request for reconsideration related to the amendment of the Commercial Act passed by the National Assembly, he was reserved but said, "Both Acting Prime Minister Choi and I are working with the same mindset of following the President's instructions."

Regarding the management evaluation of Woori Financial Group, he said, "We are currently reviewing the legal requirements related to the application of exceptional approvals, such as the feasibility of business plans, soundness of financial management, and internal control audits during the subsidiary incorporation review process," and added, "We plan to deliver the results to the Financial Services Commission within this month at the latest."

Lee Bok-hyun, Governor of the Financial Supervisory Service, is speaking at a press conference held with reporters at the FSS headquarters in Yeouido, Seoul on the 19th. Photo by Moon Chae-seok

The following is a Q&A from Governor Lee's press briefing.

▲ You mentioned that the authorities will actively support and assist Samsung's initiative. Can this be interpreted as support not limited to Samsung SDI but for the entire group?

= I believe that the authorities should assist in areas where support is possible, such as reviewing the securities registration statement during Samsung SDI's capital increase process. Economic development is my responsibility. Personally, I think it is preferable that the trial concerning Chairman Lee Jae-yong's unfair merger and accounting fraud, which is currently before the Supreme Court, be discussed as a policy issue aimed at enhancing shareholder value rather than from a punishment perspective. I hope it is not approached by detaining anyone. I have carefully reviewed the initiative and agree with many points. For example, we will see if there are areas where we can assist in the incorporation of Samsung Life Insurance as a subsidiary and the capital increase of SDI. Even if the deadline for processing the securities registration statement is not met, it would be better to quickly adjust the schedule and help Samsung SDI with fundraising. We are currently discussing this at the practical level.

▲ You said you will deliver the results of Woori Financial Group's management evaluation to the FSC within this month. Will you conclude and notify whether the subsidiary incorporation approval is granted? Will this be disclosed to the media?

= The management evaluation is an internal assessment by the supervisory authorities of the risk factors of major financial companies. It is difficult to provide more detailed information at this time. We will convey to the FSC the possible scenarios we (FSS) consider regarding exceptions to subsidiary incorporation requirements, such as capital increase. The FSC will promptly review our opinions to make a balanced judgment on whether to limit the scope to capital increase issues or to broaden it to improvement measures affecting the soundness of financial companies. We will assist to ensure there is no discrepancy as the FSC must also consider issues such as improving internal control failures and the development of the insurance industry and financial holding companies.

▲ As a member participating in the FSC regular meetings, what is your opinion on Woori Financial Group's conditional acquisition of subsidiaries?

= Currently, there is no finalized opinion.

▲ If Woori Financial Group submits additional internal control improvement plans, will this be positively reflected in the review?

= If the plan is feasible and FSC members are confident it can change the currently visible negative failures, it can have a positive effect.

▲ Have you communicated with Acting Prime Minister Choi regarding the re-request for reconsideration of the amendment to the Commercial Act? If not, do you plan to establish communication?

= Acting Prime Minister Choi will exercise his rights as the acting Prime Minister. I find it burdensome even to say that I am advancing capital market governance modernization under President Yoon Seok-youl's instructions. Ultimately, I will not disclose in a public setting whether I have given any opinions or communicated with Acting Prime Minister Choi. Since he is also acting on behalf of the President, I can say that he and I are working with the same mindset of following the President's instructions.

▲ How will the task force (TF) related to the Homeplus incident be operated?

= It will be launched from today. At least Deputy Governor Ham Yong-il (Capital Market & Accounting) or Deputy Governor Seo Jae-wan (Financial Investment) will lead it. Internal inspections are underway.

▲ MBK Partners and Shin Young Securities are engaged in a dispute over whether MBK was aware in advance of the downgrade of Homeplus's credit rating. Will the FSS notify both parties if the truth is determined during the inspection?

= If I must answer, I would say "Yes."

▲ Are there plans to expand inspections to include credit card companies and others besides securities firms and credit rating agencies related to Homeplus?

= The Financial Investment Inspection Bureau has started inspecting MBK from today. Depending on the future progress of Homeplus's rehabilitation procedures, there is room to expand the inspection. Currently, we are inspecting the MBK fund. We will focus our capabilities on inspecting key items and investigating unfair trading. Under Deputy Governor Ham Yong-il, a separate TF will be formed to proceed with inspections similar to those for the T-Mef (Timon & Wemakeprice) consumer travel and accommodation product non-payment incident and the Taeyoung Construction real estate financing project (PF) insolvency incident. A comprehensive fact-finding inspection will be conducted.