Revival of 'Gwanpia' in the Financial Sector... Will Officials Lead Jugeumgong and Nonghyup Financial Too? (Comprehensive)

Housing Finance Corporation closes applications for next president on 4th
NH Nonghyup Financial Group also proceeds with next chairman election
Most past leaders share the common background of being former bureaucrats

Kim Kwang-soo, the newly appointed chairman of the Korea Federation of Banks, is arriving for his first day at the Bankers' Hall in Jung-gu, Seoul, on the 1st. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Park Sun-mi] As key financial institutions remain dominated by Gwanpia (bureaucrat + mafia), attention is focused on the leadership changes underway at the Korea Housing Finance Corporation and NH Nonghyup Financial Group.

Since most former heads of these two organizations were from Mofia (a blend of MOF, the former Ministry of Finance and Economy’s English abbreviation, and mafia) and Gwanpia backgrounds, the market expects their successors to likely be former government officials as well. Although no concrete candidates have emerged yet, it is anticipated that controversy will be inevitable depending on the results of the association head appointments.

According to the financial sector on the 1st, the Korea Housing Finance Corporation will close applications for the next president position, succeeding CEO Lee Jeong-hwan, at 6 p.m. on the 4th. In accordance with internal regulations requiring the formation of an Executive Recommendation Committee (ERC) two months before the CEO’s term expires, the corporation has already established the ERC. Lee’s term ends on January 2 of next year.

The ERC will review the submitted applications, conduct interviews, and recommend multiple candidates for the next CEO to the Financial Services Commission. The CEO of the Korea Housing Finance Corporation is appointed by the president upon the recommendation of the Financial Services Commission chairman.

Since the public recruitment deadline has not yet passed, there are no prominent candidates for the next CEO at this time. However, by convention, it is highly likely that a candidate from the Financial Services Commission or Ministry of Economy and Finance will be appointed. Except for the inaugural CEO Jeong Hong-sik, the corporation’s CEOs have traditionally been former bureaucrats or Bank of Korea officials.

Lee is no exception. Having entered public service through the 17th Administrative Examination, Lee has held positions such as Director General of the Treasury Bureau at the Ministry of Strategy and Finance, Economic Counselor at the OECD, Director of the Policy Situation Office at the Office for Government Policy Coordination, and Chairman of the Korea Exchange before assuming the CEO role at the Korea Housing Finance Corporation in January 2018. Although no CEO has ever been reappointed, it is not legally impossible, so there is speculation that Lee may serve a second term.

Bankers Association 'First Day' Chairman Kim Kwang-soo
NH Nonghyup Financial Group Conducts Next Chairman Selection Process

NH Nonghyup Financial Group is also conducting the selection process for the next chairman to succeed former chairman Kim Kwang-soo, who began his term as chairman of the Bankers Association on the same day. Kim In-tae, Executive Vice President and Head of the Management Planning Division, is currently acting as interim chairman. On the 27th of last month, Nonghyup Financial held the Executive Candidate Recommendation Committee meeting to initiate the succession process.

They are currently searching for candidates both internally and externally. The Nonghyup Financial ERC must complete the final candidate recommendation process within 40 days of the succession process start date. This means the final candidate for the next chairman is expected to be decided by the end of this month at the earliest or early next month at the latest.

There is talk that for Nonghyup Financial’s growth, an internal promotion to the chairman position would leverage the financial group’s expertise. However, following precedent, it is highly likely that a senior bureaucrat from outside will be included among the final candidates. Although Nonghyup Financial is not a public institution, it operates policy funds and returns profits to farmers, giving it a strong public character, and its chairmen have historically been former bureaucrats.

The fact that the National Agricultural Cooperative Federation, which receives government funding, is the major shareholder also means that candidates who can maintain close ties with the government are preferred. Except for the inaugural chairman Shin Chung-sik, the chairmanship has traditionally been held by bureaucrats from the Ministry of Strategy and Finance’s predecessor, the Ministry of Finance and Economy, so there is widespread perception that a bureaucrat will be elected as the new chairman this time as well.

Moreover, with former chairman Kim being elected as chairman of the Bankers Association, the Nonghyup Financial chairman position has become an ideal role for traditional bureaucrats to gain experience in private financial companies, making it even more popular among bureaucrats. This is why there is speculation that a well-known bureaucrat will be considered for the position in the year-end ministerial reshuffle.

Financial Sector Dominated by Gwanpia... Some Viewpoint Critical

Although there was a clear decline of Mofia and Gwanpia influence across the financial sector due to strong public criticism, recently Mofia and Gwanpia appear to have fully revived in the financial industry as a shield against external government pressures. Jeong Ji-won, an economic bureaucrat, was elected as the next chairman of the General Insurance Association; Kim Kwang-soo was elected chairman of the Bankers Association; and Jeong Hee-soo, a three-term National Assembly member and former chair of the National Assembly’s Finance Committee, was appointed as head of the Life Insurance Association. Additionally, Yoo Kwang-yeol, former Senior Deputy Governor of the Financial Supervisory Service, was appointed as the new CEO of SGI Seoul Guarantee.

In a recent statement, the Financial Justice Solidarity said, "Financial associations appear to be seeking Mofia chairpersons who can shield them from regulatory pressure amid a series of turbulent events in the financial sector, such as the private equity fund scandal and ongoing insurance disputes. At this critical juncture, where financial companies’ predatory behavior against consumers continues unabated, we strongly urge financial companies to reflect on their actions and lead the way in breaking away from government-controlled finance to create a 'fair and safe financial market.'"

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