Top regulator to overhaul 4 big banks
By Kim Tae-gyu
Korea’s top financial regulator said Thursday he will overhaul the governance of four major banking groups, possibly limiting terms of office for their leaders and revising the selection system of outside directors.
Financial Services Commission (FSC) Chairman Kim Seok-dong told foreign correspondents in Seoul, “Have a look at what KB and Shinhan have done. I will not condone what is apparently problematic corporate governance.”
Regarding Woori Financial whose privatization has been stalling, Kim said, “I will settle the matter sooner rather than later.”
Although Kim didn’t specify the reasons for it, he obviously referred to KB for problems last year before current Chairman Euh Yoon-dae took over. The problems concerned outside directors flexing their muscles. Shinhan also experienced unprecedented conflict between its leaders, which ended up in legal battles and their resignations.
Woori is currently owned by the state-run Korea Deposit Insurance Corp., which has a 57-percent stake in the Seoul-headquartered financial group. Its privatization has been one of the longest-overdue works of the FSC.
Regarding Hana Financial, the 57-year-old said that the FSC will make the final decision on whether or not Lone Star Funds was eligible to take over Korea Exchange Bank (KEB) — which Hana is seeking to purchase — in 2003.
The FSC has reviewed the issue over the past few years, to little avail.
Should the FSC conclude that Lone Star was not eligible, it would be a big headache for Hana Financial, which agreed to buy KEB at 4.7 trillion won ($4.1 billion) from the U.S. hedge fund.
Kim also indicated that the changes in the banking industry might involve large-sized mergers and acquisitions (M&A) under his grandiose scheme of nurturing international investment banks (IBs).
“The size of the country’s top brokerages is a 30th of that of Goldman Sachs. They are simply no-names on the global scene,” said Kim, a life-time bureaucrat famous for his interventionism rather than believing in the self-regulating power of the market.
“In order to nurture top IBs here, we have two tools to support them and positive systems for improving conditions for M&A.”
Marriages between major brokerage houses are possible under the initiative of the government since two of the top four players, Woori and Daewoo, are now owned by agencies overseen by the FSC.
Kim noted that the shake-up might affect not only the financial sector but also other industries.
“During the Asian currency crisis, 14 out of the country’s foremost 30 conglomerates collapsed. Pending issues on the market should be solved right away. Otherwise, we will face setbacks like the problems with savings bank,” Kim said.
“Although the economy has recovered to some extent, I still think the crisis continues. In this climate, I will carry out corporate restructuring. I will try to revive relevant laws aimed at accelerating restructuring, which have expired.”
Since Kim took office on Jan. 3, the FSC has suspended eight out of the country’s 105 savings banks, citing liquidity shortages and financial instability.