Financial Supervisory Service Governor Lee Chan-jin summoned bank holding company chairmen today (September 23) to reiterate the fairness and transparency of the CEO selection process for financial company subsidiaries, urging them to swiftly address any shortcomings before launching the selection procedure.

Governor Lee made the remarks during a meeting held this morning at the main office in Yeouido, Seoul, with the Chairman of the Korea Federation of Banks and the chairmen of eight major bank holding companies.

"Since early this year, financial authorities and the financial sector have deliberated on measures to prevent CEOs from entrenching themselves and to improve the succession process fairly," Lee said. "Please strive to ensure that subsidiary CEOs are selected through transparent and fair procedures."

Mentioning "daegongmusa," a term denoting impartiality free from personal bias, he added, "The CEO selection process must be operated as a procedure to select qualified candidates based on ability, without being bogged down by specific factions or personal ties."

In particular, citing specific CEO qualification requirements and minimum verification periods for each evaluation stage, he ordered, "Holding companies that have yet to establish basic and core procedures must promptly remedy any shortcomings before initiating the selection process."

He also stated that holding companies' Subsidiary CEO Candidate Recommendation Committees must be guaranteed to perform the substantive role of subsidiaries' Executive Candidate Recommendation Committees in line with the spirit of the Act on Corporate Governance of Financial Companies.

Specifically, he noted that guarantees must be provided for sufficient information sharing, such as a standing pool of CEO candidates, and the reflection of recommendations from committee members during candidate evaluations.

Korea Federation of Banks Chairman Cho Yong-byoung responded, "In keeping with the standing of bank holding companies in the financial industry, we will actively cooperate on balanced regional development, governance improvement, and the strengthening of internal controls."

Bank holding company chairmen also stated that they would meticulously review areas for improvement in the subsidiary CEO selection process, according to the FSS.

Previously, Governor Lee also emphasized the fairness and transparency of subsidiary CEO selections during an FSS executive meeting on September 15.

As the year-end personnel reshuffle season approaches without the authorities' governance improvement guidelines having been announced, he appears to be issuing consecutive messages to refresh the atmosphere.

Governor Lee also touched upon competition in local government treasury bidding.

"Recently, voices expressing concern over excessive competition among banks in the bidding process are growing," he pointed out, adding, "The spectacle of banks with relative capital advantages being selected as final winning bidders through competition over cooperative project funds is like unfair competition on a tilted playing field."

Governor Lee stated, "National tasks such as 'intra-regional capital circulation' and 'balanced regional development' must also be considered in the operation of local government treasuries," and announced that the FSS will closely examine the impact of banks' expenditures on local government cooperative project funds on their soundness and profitability.

Furthermore, he noted, "Recently, the number and amount of financial accidents such as embezzlement, breach of trust, and negligence have continued to increase, and the scale of accidents is also growing larger," urging special attention to organizational culture to ensure that internal controls operate substantively.

According to the FSS, financial accidents in the banking sector increased from 33 cases (69.69 billion KRW) in 2023 to 47 cases (170.82 billion KRW) from this year through July.

External fraud, such as the forgery of income and employment certificates, as well as accidents related to overseas branches beyond the reach of head office internal controls, have also increased.
(Photo: Yonhap News)