Woori and Shinhan Financial Heads Face 'Fateful January'

Decision on Tenure Based on First Trial and Disciplinary Severity

May Step Down Just One Month After Reappointment

[Asia Economy Reporter Jo Gang-wook] Among the four major domestic financial holding companies, three?Woori Financial Group, Hana Financial Group, and Shinhan Financial Group?are all facing regulatory disciplinary hearings and court verdicts this month, drawing significant attention. In particular, the fate of the two leaders heading Shinhan Financial Group and Woori Financial Group will be decided this time. Both Cho Yong-byeong, Chairman of Shinhan Financial, and Sohn Tae-seung, Chairman of Woori Financial, have been reappointed, but depending on the first trial verdict and the level of disciplinary action scheduled this month, the worst-case scenario of stepping down just over a month after reappointment could occur.

According to the financial sector on the 6th, the Financial Supervisory Service (FSS) plans to hold two disciplinary committee meetings on the 16th and 30th to discuss and decide the level of sanctions related to the overseas interest rate-linked derivative-linked fund (DLF) incident. Earlier, the CEOs of Woori Bank and Hana Bank were notified by the FSS on the 26th of last month that they could face the "maximum severe disciplinary action." The level of discipline for Chairman Sohn (also CEO of Woori Bank), Ji Sung-kyu, CEO of KEB Hana Bank, and Ham Young-joo, Vice Chairman of Hana Financial Group (former CEO of KEB Hana Bank), who are subject to sanctions, is the main focus.

The FSS has five types of executive sanctions. Dismissal recommendation, suspension of duties, and reprimand warnings are considered severe disciplinary actions, while cautionary warnings and cautions are considered minor disciplinary actions. The FSS views the DLF case not as a simple case of incomplete sales but as a failure of internal bank controls and plans to hold CEOs accountable. Among severe disciplinary actions, dismissal recommendation restricts appointment as a financial company executive for five years, and suspension of duties restricts it for four years. If a reprimand warning is received, bank executives can complete their remaining term but will be restricted from employment in the financial sector for three years thereafter.

The Woori Financial Chairman Candidate Recommendation Committee unanimously recommended Chairman Sohn as the next chairman candidate on the 30th of last month. If reappointment is confirmed through the shareholders' meeting in March, he will serve as chairman for another three years. Reappointment is possible if he receives the lowest level of severe disciplinary action, a reprimand warning. However, there are views that completing a three-year term under severe disciplinary action would be a significant burden. Therefore, if Chairman Sohn, currently the only inside director, steps down, Woori Financial’s board of directors could face a situation with no inside directors. In the case of Hana Financial, if Vice Chairman Ham Young-joo, who was considered the top successor to Chairman Kim Jung-tae, receives severe disciplinary action, plans to appoint the next chairman could be disrupted.

The situation at Shinhan Financial is complicated. Chairman Cho, who is on trial for hiring irregularities related to the recruitment of new employees during his tenure as Shinhan Bank CEO, is awaiting the first trial verdict on the 22nd. Chairman Cho was also selected as the next chairman candidate on the 13th of last month and succeeded in his reappointment. If approved at the shareholders' meeting in March, Chairman Cho will continue to serve until March 2023. However, the prosecution requested a three-year prison sentence for Chairman Cho at the sentencing hearing on the 18th of the same month. Former Woori Bank CEO Lee Kwang-gu, who faced similar charges, was sentenced to one year and six months in prison in the first trial and was taken into custody. Shinhan Financial’s position is that since the first trial verdict is not a final judgment, there is no problem with Chairman Cho continuing his role. However, they have left open the possibility of follow-up measures such as appointing an acting CEO or successor in case of contingencies like "court imprisonment."

A banking official said, "From the new year, CEO risks related to both financial authorities and trial outcomes have emerged as the biggest issue in the financial sector," adding, "In the worst case, the head may step down just over a month after reappointment, so each financial holding company is expected to make every effort to reduce the level of disciplinary action."

This content was produced with the assistance of AI translation services.