Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
CEOs of Shinhan, Woori face punishment over fund fiasco
Woori Financial Group Chairman Son Tae-seung, left, and Shinhan Bank CEO Jin Ok-dong / Courtesy of each firm
By Lee Min-hyung
By Lee Min-hyung
The leaders of Woori Financial Group and Shinhan Bank are facing a serious problem as they could receive harsh punishments for their role in the mishandling of fund sales last year. This is raising concern that a final decision by the state regulatory agency may end their plans to extend their terms.
The Financial Supervisory Service (FSS) said Thursday that it had sent prior notice of tough sanctions to Woori Financial Group Chairman Son Tae-seung and Shinhan Bank CEO Jin Ok-dong ahead of its sanctions committee meeting slated for Feb. 25.
The FSS is holding them responsible for poor supervision of the lenders' sales of troubled funds linked to Lime Asset Management. Woori “sold” Lime funds worth 357.7 billion won, while those from Shinhan reached 276.9 billion won.
Both leaders received the notification that their punishment would be heavy in consideration of the gravity of the incident ― the FSS is known to be going to suspend Son and reprimand Jin. These are classified as tough sanctions as the two leaders will also not be allowed to work for other financial companies for between three to five years if the sanctions are confirmed at the meeting.
Woori and Shinhan are likely to file lawsuits to counter the punishments. In January last year, Woori Bank won its case against the regulator, which had imposed disciplinary action on Son over his poor handling of the sales of derivatives-linked funds. With the court ruling for the lender, it succeeded in extending Son's three-year chairmanship in March.
Shinhan Bank is also paying attention to the final decision by the regulator. Jin is starting his second term this year, but if he is reprimanded he will not be able to serve a third term, denting his chances of becoming chairman of Shinhan Financial Group.
Shinhan Financial Group Chairman Cho Yong-byoung was also slapped with a warning from the regulator for his involvement in the fund sales fiasco at Shinhan Bank and Shinhan Investment. But a warning is considered a minor sanction, and he will remain in place for the time being.
Woori and Shinhan are keeping a low profile over whether they will file a lawsuit against the FSS sanctions, as the final decision has not been confirmed. But given the “long-time tradition” of the financial circle here, the two are likely to be preparing administrative litigation to prevent any leadership vacuum.
Korean lenders' botched handling of the fund sales made headlines nationwide last year, leaving a number of customers falling victim to the incomplete sales of risky fund products.
Other lenders, including Hana Bank and the Industrial Bank of Korea (IBK), are also mired in a similar dispute. Earlier, the FSS also slapped heavy sanctions on former IBK CEO Kim Do-jin for his poor supervision of the sales of risky funds also linked to Lime Asset Management, as well as Discovery Asset Management.
The FSS is now finalizing its decision on the level of sanctions for the leaders of the banks embroiled in the fund fiasco controversy, by the end of the first quarter, as it had already been delayed due to the COVID-19 pandemic.