[DLF Heavy Sanctions] What About Woori and Hana Financial Leaders... Woori Bank President Candidate Selection Fails Again (Comprehensive)

Son Tae-seung, Chairman of Woori Financial Group, is declaring collaborative management toward becoming the number one financial group trusted by customers at the '2020 Woori Financial Group Management Strategy Meeting' held on the 10th.

[Asia Economy Reporter Kangwook Cho] The calculations of two financial companies have become complicated as Sohn Tae-seung, Chairman of Woori Financial Group, and Ham Young-joo, Vice Chairman of Hana Financial Group, received heavy disciplinary actions related to the overseas interest rate-linked derivative-linked fund (DLF) incident. Chairman Sohn's path to reappointment has been blocked, and Vice Chairman Ham's challenge for the next chairman position has become uncertain. The industry is closely monitoring the timing when the disciplinary measures officially take effect, while also considering legal action. On the 31st, Woori Financial held a Group Executive Candidate Recommendation Committee meeting but failed to select the final candidate for the next Woori Bank president.

The Financial Supervisory Service (FSS) Disciplinary Committee decided on the 30th during its third meeting to issue a heavy disciplinary warning to Chairman Sohn (who also serves as Woori Bank president) and Vice Chairman Ham (former KEB Hana Bank president). This was to hold them accountable as CEOs for internal control failures related to the overseas interest rate-linked DLF incident. Regarding Hana Bank President Ji Sung-kyu, a cautionary warning was issued for obstructing the FSS investigation by deleting the bank’s internal investigation results. The FSS also decided to recommend to the Financial Services Commission (FSC) institutional sanctions against Woori Bank and Hana Bank, including partial suspension of some operations for six months and fines.

If FSS Governor Yoon Seok-heon confirms the heavy disciplinary actions based on the Disciplinary Committee’s results, Chairman Sohn and Vice Chairman Ham will face the crisis of having to step down from their executive positions at the end of their current terms. Disciplinary warnings for executives, unlike dismissal recommendations or suspensions, are finalized by the FSS Governor’s decision without requiring FSC regular meeting approval. Since Governor Yoon recently stated to reporters that he would respect the Disciplinary Committee’s conclusion, it is likely that the heavy disciplinary actions will be confirmed as is.

However, the timing of when the disciplinary actions take effect is crucial. The DLF incident involves both individual and institutional sanctions, so the results for executives and institutions are notified simultaneously. While disciplinary warnings for executives are finalized by the FSS Governor’s decision, institutional heavy sanctions or fines require approval through the Securities and Futures Commission and finally the FSC regular meeting. This means the official disciplinary effect for the two executives will be postponed until the FSC regular meeting’s approval.

Particularly urgent is Chairman Sohn, who is up for reappointment. Sohn was selected as the sole candidate for the next chairman position on December 30 last year, and according to the original plan, he was to serve an additional three-year term after the March regular shareholders’ meeting. However, if the FSC regular meeting results are announced before the March shareholders’ meeting, reappointment will be impossible. The Securities and Futures Commission and FSC regular meetings are held biweekly on Wednesdays. The FSC regular meeting scheduled for February 5 will include the agenda for KakaoPay’s major shareholder suitability review for Baro Investment & Securities. Therefore, the earliest possible date for the disciplinary results to be placed on the agenda could be February 19. The agenda could be delayed, and depending on the importance of the matter, several more regular meetings might be held, but there are about two months left until the shareholders’ meeting. Woori Financial usually holds its shareholders’ meeting at the end of March; last year’s meeting was held on March 27.

If Chairman Sohn cannot be reappointed, Woori Financial will need to select a new chairman candidate, which could have a ripple effect on the ongoing selection process for the next Woori Bank president. The Group Executive Candidate Recommendation Committee meeting held that day also did not decide on the next bank president candidate. It is reported that discussions focused more on the future developments following the disciplinary results than on selecting the candidate. The committee had already postponed the announcement of the final candidate for the next Woori Bank president from the 29th to the 31st. Chairman Sohn serves as the committee chairman. Woori Financial stated, "After discussing the recommendation of the next Woori Bank president candidate at the Group Executive Candidate Recommendation Committee meeting on the 31st, it was decided to reconsider the candidate recommendation schedule due to new changing conditions."

Jisung Kyu, the new CEO of KEB Hana Bank (right), and former CEO Ham Young-joo are embracing at the inauguration and retirement ceremony held on the 21st at the new Euljiro headquarters of Hana Financial Group in Seoul. Photo by Moon Honam munonam@

Disruptions are also inevitable in Hana Financial’s succession plans. Current Chairman Kim Jung-tae’s term ends in March next year, but the possibility that Vice Chairman Ham, one of the leading chairman candidates, will be unable to challenge for the chairman position has increased significantly. Vice Chairman Ham had already stepped down last year after attempting a third term as bank president and clashing with the FSS.

For this reason, the industry expects that financial companies are likely to consider filing injunctions to suspend the enforcement of the FSS disciplinary measures as a legal strategy. According to FSS regulations, executives can file objections to disciplinary results but cannot suspend enforcement. The industry also views that financial companies have a considerable chance of winning if the matter proceeds to legal disputes, as the legal basis for disciplining management over the DLF incident is considered weak. The amendment to the Financial Company Governance Act, which would provide grounds to sanction CEOs for internal control failures, is currently pending in the National Assembly. However, there is also a view that legally challenging FSS sanctions could be burdensome for financial companies.

A financial industry official said, "There is growing concern about potential management vacuum situations, so financial companies are reviewing various plans, including the possibility of winning lawsuits. However, financial companies supervised by the FSS inevitably face significant burdens when confronting the FSS head-on in legal disputes."

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