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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] The Financial Supervisory Service (FSS) has initiated a special review of eight major bank holding companies in response to President Lee Jae-myung’s strong criticism of “self-reappointment” practices within the banking sector, which he described last December as a “corrupt inner circle.”
According to financial industry sources on January 14, the FSS review targets five major financial groups—KB, Shinhan, Hana, Woori, and NH NongHyup—as well as three regional groups—BNK, DGB, and JB. In December 2023, the FSS introduced guideline-based best practices to modernize bank governance, and has since provided administrative guidance. However, issues have arisen as some banks reportedly implemented these guidelines only superficially or circumvented them through procedural loopholes.
A notable example involves certain bank chairmen filling boards with loyal insiders to secure reappointment. BNK Financial Chairman Bin Dae-in faced doubts about reappointment after a KRW 300 billion embezzlement scandal occurred at BNK Gyeongnam Bank in his first year as chairman in 2023, yet he successfully retained his position last December. All eight outside directors on the nomination committee responsible for his reappointment were reportedly appointed by Bin himself, sparking controversy. BNK Financial also reportedly shortened the external candidate application period to just five business days, making it difficult for outsiders to apply.
Similarly, JB Financial Chairman Kim Ki-hong secured a third term under the previous Yoon Suk-yeol administration in March 2024, with all seven outside directors on the nomination committee recruited by him. The bank is also alleged to have amended internal rules regarding age limits for chairmen, favoring Kim. Notably, Kim is currently the only bank holding CEO to serve a third consecutive term.
Earlier this year, former JB Jeonbuk Bank President Baek Jong-il abruptly resigned nine days after his appointment as vice chairman, raising speculation that he stepped down amid anticipated governance scrutiny by financial authorities.
Other recent reappointments, including Jin Ok-dong of Shinhan Financial, Lim Jong-ryong of Woori Financial, and Ham Young-joo of Hana Financial, are expected to be included in the FSS special review to verify the fairness and integrity of their reappointment processes.
In previous on-site inspections, the FSS identified banks that interpreted board “expertise” standards arbitrarily and other financial groups that evaluated outside directors using only internal surveys rather than independent external institutions.
During the special review, the FSS will focus on whether governance guidelines are effectively enforced, whether board structures or internal regulations weaken the intent of the guidelines, and any practices that undermine sound governance. The FSS stated that the results will be used to identify best practices and areas for improvement, which will be reflected in future discussions of the Governance Modernization Task Force, and shared with banks to encourage voluntary reform.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
