Lee Chanjin Summons Financial Holding Chairmen Before Bank Presidents' Reshuffles: "CEO Appointments Must Exclude Factions and Personal Ties"

Calls for Transparent and Fair CEO Succession at Eight Holding Companies
"Ensuring Substantive Role of Subsidiary Nomination Committees"
Audit Announced for Cooperative Project Expenses Amid Fierce Competition for Local Government Treasury Accou

Lee Chanjin, Chairman of the Financial Supervisory Service, has summoned the heads of eight financial holding companies, calling for transparent and fair succession procedures ahead of a large-scale year-end reshuffle involving the CEOs of the five major banks and other top financial executives. This comes just over a week after he publicly requested improvements to CEO succession processes. As the process of selecting the heads of the five major banks has already begun or is scheduled to begin later this month, Lee once again emphasized the importance of merit-based appointments and the substantial role of subsidiary Executive Candidate Recommendation Committees (reco committee), warning against excessive influence by holding company chairpersons in personnel decisions.

On September 23, at the Financial Supervisory Service headquarters in Yeouido, Seoul, Chairman Lee held a meeting with the heads of eight financial holding companies and the chairman of the Korea Federation of Banks. He urged them to “make every effort to select the most suitable candidates for subsidiary CEOs based on ability, without being swayed by particular factions or personal relationships.” He stressed, “The second half of this year is a period of change with CEO selection procedures underway at more than 70 subsidiaries, including banks. The financial sector must enhance the trust of the market and the public through fair and principled work practices.”

Chairman Lee requested the establishment of detailed standards and procedures covering the entire succession process, from the selection of CEO candidates to their verification, evaluation, and documentation. In particular, in line with Article 17 of the Act on Corporate Governance of Financial Companies, he called for ensuring that the subsidiary Executive Candidate Recommendation Committees (reco committee) play a substantive role in the process by which the holding company's CEO candidate recommendation committee (parent reco committee) nominates and selects CEOs of subsidiaries. To do so, he emphasized providing the subsidiary reco committees with sufficient information, such as a pool of prospective CEO candidates, and reflecting the views of reco committee members during the candidate evaluation stage.

This statement comes just over a week after Chairman Lee urged financial holding companies to strengthen the authority of bank reco committees in CEO appointments. On September 15, he also criticized the succession procedures established by holding company candidate recommendation committees as inadequate and the role of subsidiary reco committees as limited, demanding greater transparency and fairness in the succession process.

With a major end-of-year CEO reshuffle imminent, this move is seen as an attempt to prevent holding company chairpersons from wielding excessive influence over affiliate appointments, or engaging in so-called “entrenchment” to extend their own tenure. By year-end, the terms of 54 affiliate CEOs at the five major financial holding companies will expire, and the terms of all five major bank CEOs are set to end, meaning decisions on their reappointment or replacement will be made.

In response to a series of warnings from the Financial Supervisory Service, financial holding companies are moving to adjust their CEO succession procedures. BNK Financial Group and Shinhan Financial Group have respectively expanded the powers of their bank reco committees to include CEO candidate recommendations. KB Financial Group is also reviewing similar measures, while Hana Bank and Woori Bank have already granted such authority to their reco committees.

Chairman Lee stated, “With succession procedures for many subsidiary CEOs under bank holding companies beginning in the second half, this is a meaningful opportunity to show that efforts to avoid entrenchment and improve the succession process have not been in vain.”

He also issued a warning about the issue of excessive competition among banks during the bidding process for local government treasury deposit contracts. He pointed out, “When banks with greater capital strength secure bids by aggressively competing with cooperation project budgets, it may appear as unfair competition,” and asked that “the circulation of funds within regions and regional balanced development also be taken into account.”

The Financial Supervisory Service plans to monitor whether banks have conducted thorough analyses of how expenditures on cooperation projects could affect their soundness and profitability.

Additionally, Chairman Lee called for strengthening internal controls to prevent financial incidents. The number of bank-related financial incidents rose from 33 cases involving KRW 69.69 billion in 2023 to 47 cases involving KRW 171.25 billion from January to July this year. He stressed the necessity of allocating sufficient personnel and resources so that internal controls function effectively, and announced plans to review the appropriateness of evaluation and compensation systems and organizational incentives in the event of future regulatory violations.

Chairman Lee emphasized, “The financial industry cannot exist without the trust of the market and the public,” and urged holding company chairpersons to “seriously consider the impact and social responsibility of your decisions on the Korean financial industry before making any major resolutions.”

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