FSS, FSC leaders deny influence of government while pressuring financial groups to change leadership

Chairman Lee Bok-hyeon of the Financial Supervisory Service (FSS) on Wednesday came under controversy over the government's attempts to influence the change of leadership in financial businesses. Commending Chairman Cho Yong-byeong of Shinhan Financial Group for not running for leadership for a third term but leaving his position, the head of the FSS said, “I pay my respect to him for giving his juniors an opportunity,” seemingly intending to urge Chairman Son Tae-seung of Woori Financial Group to step down. Meanwhile, Chairman Lee strongly argued that the government did not influence the selection of former Chief of State Affairs Lee Seok-joon, who handled policy-related pledges for Yoon Suk Yeol, then the presidential candidate of the People Power Party, during the presidential election period.

Shinhan Chairman Cho was expected to serve his third term after the Supreme Court in June found him not guilty of his involvement in hiring irregularities. However, he suddenly announced not to run for the presidency, mentioning his responsibility for the financial fraud involving Lime Asset Investment, leaving everyone else wondering what brought him to leave. Woori Chairman Son received severe punishment from the Financial Services Commission due to this scandal. However, financial businesses and supervisory authorities, which made a poor response, are to blame for causing such a tremendous financial scandal. Although the leaders of these supervisory organizations were replaced following the transfer of power, the supervising bodies need to carefully consider if they can even urge financial CEOs to resign solely based on their unilateral decision-making processes, which makes it easy for them to shift their responsibility for poor supervision onto financial businesses. They should consider if the sanctioned chairman may likely appeal against the heavy punishment to ask the court to make a decision and how independent financial businesses are supposed to be.

Regarding former Chief of State Affairs Lee, who was selected as the next leader of NongHyup Financial Group, FSS Chairman Lee said, “Majority shareholders made the decision at NH. If we tell them not to choose him as their leader because it will cause some controversy over the possibility of the government pulling some strings, it is exactly what puts things under the influence of the government.” On Tuesday, Chairman Kim Joo-hyun of the Financial Services Commission (FSC) implicitly tried to compel Chairman Son to leave his post while saying, concerning the former Chief of State Affairs, “It is only natural that the government influences the financial world.” Both the leaders of the supervisory authorities only play with words.

Even if there is any chance that the government can be deeply involved in decision-making in the financial field, issues can arise when this way of meddling allows it to form a strong bond with the administration. The reason behind the controversy over one of the members of the president’s campaign selected as the leader of NongHyup Financial Group is that it can accommodate an inappropriately close relationship with the government in power. Unlike Shinhan, Woori does not have major shareholders at the center of leadership. In such a financial business with a lack of leadership, if the incumbent leader steps down, a pro-government figure will likely take charge. If there is any chance for supervisory authorities to be involved in how financial businesses work, it is their inherent responsibility to prevent this from happening by granting them a higher level of independence.