Lee Chan-jin, the head of the Financial Supervisory Service, met with the chairmen of financial holding companies for the second time in nine months to discuss governance improvements. While the first meeting last year emphasized the transparency and fairness of CEO succession, this time, Lee focused on the need for actual implementation of these principles ahead of year-end CEO appointments at subsidiaries.
On September 23, Lee held a meeting at the Financial Supervisory Service in Yeouido, Seoul, with the chairman of the Bankers Association and the heads of eight major financial holding companies. This was the second official meeting since their first encounter in December of last year. In the second half of this year, the eight financial holding groups are set to appoint over 70 CEOs, including bank heads.
Lee stated, "Since the beginning of this year, financial authorities and the financial sector have been considering ways to improve the fairness of succession processes, avoiding trench-building among CEOs. This second half of the year presents a good opportunity to demonstrate that our efforts have not been in vain."
This directive is more specific than previous ones. Lee urged holding companies that have not yet established minimum verification periods for CEO qualifications and evaluation stages to address these gaps before starting the appointment process. He also called for the candidate recommendation committees of subsidiary companies to provide sufficient information to the executive candidate recommendation committees and to reflect the opinions of the committees in candidate evaluations to ensure they play a substantial role.
Lee's frequency of meetings with the financial holding chairmen is not significantly higher than that of his predecessor. However, it is notable that governance issues have been a key agenda item in both meetings held since he took office.
As the supervisory authority's directives become more concrete, financial holding companies have been cautious in publicly expressing their positions. When reporters inquired about governance improvements and competition for municipal deposits before and after the meeting, the chairmen of the eight financial holding companies refrained from providing substantial responses.
A comprehensive overhaul of laws and regulations is still ongoing. While stringent regulations, such as directly limiting the three-term tenure of financial holding chairmen, have not yet materialized, companies like BNK Financial and Shinhan Financial are revising their succession processes by expanding the roles of their subsidiary candidate recommendation committees. Consequently, the upcoming year-end CEO appointments are expected to serve as a critical test of the effectiveness of the governance improvements that have been pursued.
During this meeting, the competition for municipal deposits also emerged as a new supervisory issue. The Financial Supervisory Service's concerns about excessive competition were highlighted following a fierce contest between Shinhan Bank and Hana Bank for Incheon City's first deposit, valued at approximately 15 trillion won.
Additionally, Lee pointed out that the competition for municipal deposits, where banks with relatively superior capital compete for cooperative project funds, could be perceived as "unfair competition occurring on an uneven playing field." This interpretation aligns with the competitive pressures faced by local banks regarding the entry of large commercial banks into the municipal deposit market.
* This article has been translated by AI.
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