Banks benefiting from absence of watchdog chief

Former Financial Supervisory Service Governor Yoon Suk-heun delivers a retirement speech at the agency's headquarters in Seoul, May 7. Yonhap

By Lee Min-hyung

Korea's banks and financial firms are benefiting from a longer-than-expected leadership vacuum at the Financial Supervisory Service (FSS), as a series of sanction-related risks on them have been put on hold.

The position has remained vacant for two months, after former FSS Governor Yoon Suk-heun ended his three-year term in early May. The absence of the hawkish former leader, in itself, came as a boon for banks at a time when they are still grappling with the aftermath of their involvement in a nationwide fund misselling scandal.

The FSS planned to hold a sanctions committee by the end of June to discuss the level of punishment on Hana Bank for its misselling of risky funds of Lime Asset Management. But the plan has been delayed to July. Chances are it can be postponed further amid the prolonged leadership vacuum.

“The FSS will continue to face a tough time in making swift decisions on key agendas without a leader, and the status quo creates more room for banks to focus more on their business, without having to walk on eggshells around the watchdog,” a financial industry source said.

Woori Bank was also scheduled to receive a comprehensive inspection from the FSS in the first half of this year, but this has also been delayed to an unconfirmed date.

“Banks and financial firms here have remained highly vulnerable to any risks from the watchdog's sanctions, so they paid sharp attention to its every single movement,” the official said. “But this appears not to have been the case for the past two months since Yoon left office.”

The FSS' leadership vacuum will allow banks and their financial holding firms to focus more on dealing with pending issues ― such as offering interim dividends or digital transformation, the official said.

It appears unlikely that any new leader of the FSS will be able to remain as hawkish as Yoon, as the next leader will be in office for less than a year due to the 2022 presidential election next March.