[1mm Financial Talk] Term Ending Soon but Uncertain 'Next Savings Bank Central Association President Appointment'... "Who Will Steer the Ship?"

Despite only three weeks remaining until the term of the current chairman, Oh Hwa-kyung, head of the Korea Federation of Savings Banks, expires, the process of selecting the next chairman has yet to even begin. The first step in the election procedure, convening the Federation's board of directors and forming the Chairman Candidate Recommendation Committee, has not progressed. This is due to the government being unable to present a bureaucrat candidate for the Federation chairman amid the impeachment aftermath. Since the financial authorities need to give a signal regarding the so-called candidate pool for the Recommendation Committee and recruitment announcement to proceed with the next steps, criticism is mounting that this is due to the deeply rooted 'government-controlled finance' in the financial sector.

Oh Hwa-kyung, President of the Korea Federation of Savings Banks. Provided by the Korea Federation of Savings Banks

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According to the Federation and the industry on the 23rd, the Federation's internal regulations require that candidates must be announced on the Federation's internet homepage at least 14 days before the election day. Before selecting candidates, the Federation's board of directors must approve the formation of the Recommendation Committee and the Election Management Committee. This means that to elect the next chairman or approve Oh's reappointment by the expiration of Oh Hwa-kyung's term on the 16th of next month, the next chairman candidates must be shortlisted by the 2nd of next month.

The problem is that the savings banks are suffering from restructuring due to poor business conditions, and if the appointment of the next chairman is delayed, there are growing concerns that communication with authorities and business operations will be disrupted. Neither private sector figures nor bureaucrats have come forward as candidates.

Until the end of last year, private sector figures such as Im Jin-gu, chairman of Fairway Asset Management (formerly CEO of SBI Savings Bank), and Shin Hong-seop, former president of KB Savings Bank, were mentioned as candidates, but interest has recently waned. In fact, there is an opinion that the possibility of current private savings bank CEOs or executives running for Federation chairman is low. Oh's annual salary is known to be around 500 million KRW including bonuses, but if a current savings bank CEO moves to become Federation chairman, they would have to significantly reduce their take-home pay, which acts as a deterrent. Oh himself pledged to "cut my salary by 50% and use it to employ professional advisors within the Federation."

Most previous chairmen before Oh were bureaucrats, but no candidates from former bureaucrats have appeared yet. Typically, the Federation chairman election officially begins when bureaucrat candidates emerge, but due to the impeachment aftermath causing disruptions in government personnel, it is interpreted that this is also affecting the Federation chairman election. According to the Federation and the industry, there have been no signs of unofficial meetings or discussions between the authorities, the Federation board, and key executives of member companies in Seoul and regional areas regarding the next chairman candidates.

The industry states that the most important role of the Federation chairman is to push through industry opinions to the authorities during policy execution processes such as lowering deposit insurance premiums. Under the Depositor Protection Act, savings banks must pay 0.4% of deposit balances as deposit insurance premiums, which is higher than banks (0.08%), acting as an obstacle to improving savings banks' profitability.

From this perspective, there is a prevailing view that bureaucrats would be more advantageous than private sector figures in persuading authorities to revise policies such as lowering deposit insurance premium rates. Looking at past chairmen including Oh (the 19th chairman), except for former chairmen Kwak Woo-seop, Lee Soon-woo, and Oh, all were bureaucrats. Ten of them came from the Ministry of Strategy and Finance, making up the majority.

With concerns about a leadership vacuum growing, there is also a view that Oh's reappointment is likely. Among the 19 past chairmen, only two have been reappointed (the 2nd and 3rd chairman Choi Byung-il, and the 5th and 6th chairman Myung Dong-geun), but given the many current issues such as adjusting deposit insurance premium rates, timely corrective actions for savings banks, and easing regulations on mergers and acquisitions (M&A), stable leadership from Oh is considered necessary.

A savings bank official in Seoul said, "Once the Federation convenes the Recommendation Committee and begins the election process, the 79 member companies will immediately show interest and actively participate in voting," adding, "With only three weeks left until the current chairman's term expires, if the appointment process remains sluggish to the point that no candidate rumors are heard, who will steer the savings bank industry?" He added, "To address industry demands such as lowering deposit insurance premiums or even to respond to current issues like high interest rates and real estate financing project (PF) risks, the chairman appointment issue must be resolved quickly."

Contrary to industry hopes, neither the Federation nor the financial authorities are actively accelerating the chairman appointment process. The Federation emphasized that the chairman election is conducted transparently based on the 'one member, one vote' principle among the 79 member companies and that it does not move according to signals from the authorities. There is no sign of any member companies rallying behind a specific candidate, and it is difficult to hurriedly proceed with the next chairman election process to meet the term expiration on the 16th of next month.

The authorities are also cautious. A Financial Services Commission official said, "The relevant departments do not intervene in matters related to the Federation chairman personnel." When asked if there are any emerging candidates among retired officials who left office more than three years ago or if the authorities, including operational departments, are meeting with the Federation board and member company executives, the official replied, "I don't know."

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