Unexpected Sanctions Committee Outcome and First Leadership Change in 10 Years... Focus on Hana Bank

FSS Unexpectedly Concludes Private Equity Fund Sanction Review
Chairman Replacement Imminent After 10 Years...Final Candidate Group of 5 Decided

[Asia Economy Reporter Minwoo Lee] Hana Financial Group is on high alert for the aftershocks expected to hit following the Lunar New Year holiday. This is due to the Financial Supervisory Service (FSS) deciding on unexpected sanctions related to the incomplete sales of private equity funds, as well as an upcoming leadership change for the first time in 10 years.

◆Unexpected timing and content of the announcement= According to the financial industry on the 29th, the FSS held the third disciplinary committee meeting on the 27th regarding Hana Bank’s incomplete sales of private equity funds and decided to impose a partial suspension of business operations for three months along with a fine on Hana Bank. Regarding employees, it was resolved to proceed with the maximum penalty of dismissal (retirement). However, the disciplinary action against Ji Sung-kyu, Vice Chairman of Hana Financial Group and the bank president at the time of the incomplete sales, was not reviewed. The FSS plans to recommend these sanctions to the Financial Services Commission.

Hana Bank, which had been preliminarily notified of an 'institutional warning' and expected a reduction in disciplinary measures, is reportedly taken aback. Financial sanctions are ranked by severity as follows: ▲revocation of business license, permit, or registration ▲partial or full suspension of business operations ▲branch closure or partial/full suspension of branch operations ▲institutional warning ▲institutional caution. An institutional warning prohibits entry into new business areas requiring financial authority approval for one year. Partial suspension of business operations bans related new business activities for three years starting from the end of the suspension period.

In particular, since it was anticipated that no conclusion would be reached at this disciplinary meeting, the sudden sanctions just before the Lunar New Year holiday have drawn reactions of surprise. Due to many complex issues, even after two previous disciplinary meetings, it was reported that not all questions regarding the 11 private equity funds had been completed. The industry expected the final decision to be postponed until next month, but the disciplinary meeting, which started at 2 p.m. on the 27th, continued until midnight and was finally concluded.

However, the review of violations related to the CEO’s disciplinary measures and the obligation to establish internal control standards was not conducted. Therefore, the disciplinary 'warning' against Ji Sung-kyu, Vice Chairman of Hana Financial Group and bank president at the time, was naturally postponed. Since a lawsuit between the FSS and the financial company is ongoing regarding the obligation to establish internal control standards under the Corporate Governance Act, it is interpreted that they will wait for the court’s judgment first.

Ham Young-joo, Vice Chairman of Hana Financial Group (left), is embracing Ji Sung-kyu, Vice Chairman of Hana Financial Group, who was appointed as the new bank president at the inauguration ceremony held on March 21, 2019, at the new Hana Financial Group headquarters in Euljiro, Seoul, when Ham was the bank president. Photo by Moon Ho-nam munonam@

◆Speeding up the leadership change after 10 years= Interest in the 'post-Kim Jung-tae' leadership is expected to intensify. Hana Financial Group announced that it held a chairman candidate recommendation committee meeting the day before and finalized five candidates for the next chairman: three internal and two external candidates. Initially, it was expected that the first candidate pool (longlist) would be selected in January and the final candidate pool (shortlist) next month, but all were completed before the Lunar New Year holiday.

The final candidate pool includes three internal and two external candidates. The internal candidates are Vice Chairman Ham Young-joo, President Park Sung-ho, and CEO Yoon Kyu-sun. The external candidates are former Korea Investment Corporation (KIC) President Choi Hee-nam and former Bain & Company Korea CEO Lee Sung-yong. Kim Jung-tae, who has served four consecutive terms since 2012 as chairman of Hana Financial Group, was excluded, having already announced multiple times that he would not seek reappointment. Additionally, this year he reaches the maximum possible age limit under the articles of incorporation (70 years old), which is a burden since amending the articles would be required for reappointment.

In the financial sector, Vice Chairman Ham is considered the most likely candidate. He served as Hana Bank president in 2015, completing the merger of Hana Bank and Korea Exchange Bank, and has concurrently held the vice chairman position since 2016. Ongoing lawsuits related to recruitment trials and the cancellation of heavy sanctions regarding derivative-linked fund (DLF) penalties are expected to conclude next month. This is because Shinhan Financial Group Chairman Cho Yong-byeong and Woori Financial Group Chairman Sohn Tae-seung, who faced court over similar issues, were acquitted and won their cases, respectively. Vice Chairman Ji, who was considered a competitor to Ham, was excluded from the final candidate list. The unclear outcome of the legal battles related to the incomplete sales of private equity funds appears to have been a burden.

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