Suhyup Looked the Other Way on Rule-Breaking Loans... Internal Control Gaps and Bank Chief Selection Deadlock Leave It in 'Disarray'

FSS Issues 28 Management Attention and Improvement Requirements on Cooperative Oversight, Risk Management, and More
Sh Suhyup Bank President Selection Again Deadlocked 3-2... Management Uncertainty Grows

An inspection by financial authorities found that the National Federation of Fisheries Cooperatives was aware that local fisheries cooperatives had issued loans in violation of regulations but failed to take appropriate follow-up action. The inspection also uncovered improper loan-fee charges and problems with the federation’s own risk management system, leading to a series of management advisories and demands for improvements. Meanwhile, the selection of the next president of its key subsidiary, Sh Suhyup Bank, has reached an impasse, putting the federation’s management capabilities to the test, from its oversight of member cooperatives to its decision-making on subsidiary management.

FSS issues 28 management advisories and improvement demands... Oversight of cooperatives under scrutiny

According to financial authorities on October 13, the Financial Supervisory Service (FSS) recently notified the National Federation of Fisheries Cooperatives of a total of 28 measures: 16 management advisories and 12 demands for improvement.

An FSS inspection found that in March 2023, three local fisheries cooperatives jointly lent KRW 9.5 billion to Company A, taking first-ranking security interests jointly with other financial institutions. Internal rules require local cooperatives to secure senior security interests, but they failed to do so. Although the federation was informed of the loan execution, it did not conduct an appropriate inspection or impose sanctions.

In July and August 2024, five local fisheries cooperatives lent KRW 15 billion to Trust Company B, taking as collateral a right to claim reimbursement of expenses that was not permitted under the rules. The federation took no significant action. The inspection also found cases in which some local cooperatives charged loan-arrangement fees not provided for in their regulations and collected both loan-processing and early repayment fees.

Gaps were also found in the federation’s own risk management. In 2024 and 2025, it set the risk tolerance limits for its special mutual finance account at 110% and 105% of available capital, respectively, thereby allowing risks that exceeded its capacity to absorb losses. The Risk Management Committee also held nine of its 12 meetings between January 2023 and September 2025 in writing, prompting concerns that key agenda items may not have received sufficient deliberation.

Another 3-2 standoff in bank chief selection... Leadership uncertainty ahead of financial holding company conversion

From left, SH Suhyup Bank President Shin Hak-gi and Financial Intelligence Unit (FIU) Director Lee Hyung-ju.

After revealing shortcomings in its oversight of member cooperatives and its own risk management, the federation has also been unable to break the deadlock over the appointment of the next president of Sh Suhyup Bank, in which it holds a 100% stake. Differences between the federation and government-appointed committee members, compounded by disagreements among the government-appointed members themselves, have once again brought the structural problems behind repeated appointment deadlocks into focus.

Incumbent President Shin Hak-gi’s term expires on November 17. Shin, an internal candidate, and Lee Hyung-ju, a former Financial Services Commission official and current director of the Financial Intelligence Unit (FIU), are competing for the position. However, the two meetings of the executive recommendation committee, held on September 22 and October 6, ended without a decision.

The committee consists of three government-appointed members and two appointed by the federation. At least four members must agree to recommend a final candidate. The two federation-appointed members and three others, including outside director Kim Byung-kyu, recommended by the Ministry of Finance and Economy, are reportedly supporting Shin. The two members recommended by the Financial Services Commission and the Ministry of Oceans and Fisheries are supporting Lee.

This is not the first time the appointment of a Sh Suhyup Bank president has reached an impasse. In 2017, 2020 and 2022, the bank failed to finalize a candidate in the initial recruitment round and held a new round. Even after the repayment of public funds, government-appointed members hold three of the five seats, and four votes are required to recommend a final candidate. This structure is cited as a reason for delays in the appointment process.

However, as support is divided even among the government-appointed members this time, the situation cannot be viewed simply as a standoff between the government and the federation. There are also calls for the federation to move beyond its longstanding preference for internal candidates and to assess a broader range of capabilities needed to lead the transition to a financial holding company. The candidates’ ability to ensure management continuity and their expertise in implementing new growth strategies should both be considered.

President Shin has laid the groundwork for the transition to a financial holding company by acquiring Trinity Asset Management and pursuing an acquisition of SangSangin Securities, among other efforts to expand into non-bank businesses. Lee is a financial policy expert who has held key positions, including director of the Financial Policy Division and director-general of the Financial Policy Bureau at the Financial Services Commission. He is seen as capable of bringing his expertise to bear on the licensing and regulatory consultation processes required for a securities firm acquisition and the transition to a financial holding company.

The election of the president of the National Federation of Fisheries Cooperatives, scheduled for early next year, is another factor. If the bank chief appointment process drags on, support for the candidates could shift with the change in the federation’s president. The Suhyup Federation Chapter of the Korean Federation of Financial Industry Unions has also called for the appointment to be concluded promptly, including by holding the third committee meeting at an early date.

A financial industry official said, "As deadlocks in the appointment of bank presidents, rarely seen at commercial banks, keep recurring, it is necessary to review not only the appointment process but also the federation’s decision-making structure and sense of responsibility in managing its subsidiaries." The official added, "With the transition to a financial holding company ahead, the candidates’ capabilities and management strategies should be carefully assessed rather than allowing a power struggle based on their backgrounds. If necessary, differences should be narrowed through a full-scale debate so that a responsible decision can be reached promptly."

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