Hana, FSS in feud over CEO punishment

By Kim Rahn

Financial regulators and Hana Financial Group are on a collision course over the punishment of Hana Bank CEO Kim Jong-jun for his role in an improper investment.

Despite the pressure for him to resign, Hana Financial Group insists that the law allows Kim to complete his current term and called the pressure from the regulators an abuse of authority.

Officials of the Financial Supervisory Service (FSS) said Tuesday they plan to post Kim’s wrongdoing and the decision of the disciplinary committee on the FSS’ website as soon as possible.

The move is somewhat unusual considering the FSS usually takes more than a week before posting details of disciplinary action online.

The plan comes two days after Hana Financial announced that Kim would complete his current term which ends next March notwithstanding the heavy punishment imposed on him by the FSS.

The regulator reprimanded him for improperly investing in a troubled savings bank when he was head of Hana Capital in 2011.

An executive that has been slapped with a heavy penalty is technically barred from working in the financial industry for up to five years after his or her existing term ends. In this case, Kim is therefore eligible to complete his term in principle. He is however being pressured to follow the precedence of other senior executives who stepped down when they were slapped with a similar sanction.

Officials at the FSS said they view Kim’s stay as an act of defiance.

“Whether to resign is up to him. But we gave the penalty according to the law and the principle, and we think he should take responsibility for the wrongdoing,” an FSS official said.

The FSS is threatening to strictly scrutinize the bank for possible effects of “CEO risk” if Kim remains in his post.

“If a top executive does not take responsibility for a wrongdoing despite a heavy sanction, the company may have lax discipline,” the official said. “A CEO with a problem is unqualified for internal control.”

In response to the FSS pressure, Hana Bank officials said there is no change in Kim’s stance to complete his current term.

The FSS reprimanded Kim because of his role in leading Hana Capital’s 14.5 billion-won investment into Mirae Savings Bank by purchasing its shares and 6 billion-won in losses after Mirae went bankrupt. It concluded Hana Capital fabricated documents about Mirae’s value and ignored due process such as the directors’ prior approval of the purchase.

Kim Seung-yu, former Hana Financial chairman at the time of the investment, also received a warning because he was found to have indirectly ordered the investment.

He also expressed displeasure at the FSS pressure on Kim Jong-jun.

He hinted that the regulator may have other intentions behind its actions, given that it has investigated the same case twice.

“Has the FSS ever investigated one case multiple times? Doesn’t the FSS have other work to do?” he asked Yonhap News Agency.