[DLF Disciplinary Action] Disruption Inevitable in Hana Financial Successor Structure (Comprehensive)

Less than a Year Left for New Chairman Appointment 'In the Fog'
Ham Young-joo Unable to Serve as Executive for 3 Years if Disciplinary Warning Confirmed
Subsidiary Presidents Likely to Be One of Former Bank Presidents
Current Chairman Kim Jung-tae May Serve Fourth Term

Ham Young-joo, Vice Chairman of Hana Financial Group.
Photo by Yonhap News

[Asia Economy Reporter Kim Min-young] The Financial Supervisory Service (FSS) has issued a "disciplinary warning" against Ham Young-joo, Vice Chairman of Hana Financial Group, delivering a severe sanction that disrupts Hana Financial's succession plans. The current chairman, Kim Jung-tae, has a term ending in March next year, but the possibility that Vice Chairman Ham, one of the leading candidates for the chairman position, will be unable to run has increased significantly.

According to financial circles on the 31st, the FSS held a disciplinary review committee meeting the previous day regarding the overseas interest rate-linked derivative-linked funds (DLF) that caused massive principal losses, and decided to issue a disciplinary warning to Vice Chairman Ham. Ham served as the CEO of Hana Bank during the period when Hana Bank heavily sold DLF products. Alongside Ham, current Hana Bank CEO Ji Sung-kyu was given a minor disciplinary action of a "cautionary warning."

The disciplinary warning is finalized with the approval of the FSS chief, but since sanctions against institutions are also involved, the disciplinary decision must go through the Financial Services Commission's regular meeting resolution before being officially notified to the bank.

The disciplinary committee members recommended that Woori Bank and Hana Bank be subject to a six-month partial suspension of business and fines for violating internal control standards under the Financial Company Governance Act.

The severity of disciplinary actions against individual executives and institutions will be officially notified together after the regular meeting, which is expected to take about a month.

Hana Financial has not issued any particular stance regarding the disciplinary decision. A Hana Financial official stated, "No position has been decided yet." It is expected that their stance will be clarified only after the disciplinary decision is finalized and the sanction notice is received. There is also no decision yet regarding Vice Chairman Ham's resignation or future position.

Vice Chairman Ham can complete his remaining term as vice chairman but is effectively barred from running for the next chairman position. If the disciplinary warning is finalized, Ham will be prohibited from holding executive positions in financial companies for three years.

Chairman Kim's term ends in March next year, and Ham has always been regarded as the next-generation leader to lead Hana Financial.

He was appointed the first integrated CEO when the former Hana Bank and Korea Exchange Bank merged on September 1, 2015, and from 2016, he solidified his position as the group's second-in-command by serving as vice chairman of the holding company. He also stepped down after conflicts with the FSS last year when attempting a third term as CEO.

For Vice Chairman Ham to challenge the chairman position, he must first nullify the disciplinary action. Once the sanction takes effect, he can file an objection with the FSS within one month, and also has the option to request an administrative trial with the Administrative Appeals Commission or file an administrative lawsuit in court.

Ham is also currently on trial at the Seoul Western District Court, having been indicted without detention on charges including recruitment corruption.

If no suitable successor emerges, there is a possibility that Chairman Kim may attempt a fourth term. According to the bank's internal governance rules, those aged 70 or older cannot serve as chairman, but Kim, who will be 69 in March next year when the new chairman is to be selected, can narrowly qualify. However, it is reported that Kim has no intention of seeking a fourth term. Currently, the new holding company chairman is expected to be selected from among current affiliate presidents, former CEOs, or external candidates.

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