Shinhan Financial faces management vacuum

Ra Eung-chan expected to face suspension

By Kang Seung-woo

Shinhan Financial Group is facing a possible management vacuum as its Chairman Ra Eung-chan is likely to face severe disciplinary action from the Financial Supervisory Service (FSS) for violating financial transaction rules.

The FSS said Friday that it has decided to impose severe punitive measures against Ra for violating the Real Name Financial Transaction Law. It will hold a disciplinary committee meeting on Nov. 4 to finalize the penalties.

The regulator’s toughest actions include dismissal, suspension from duty and a disciplinary warning. A person who is sanctioned by any of the three measures is banned from holding an executive post at a financial company for three to five years. Given that the violation of the real name law is considered a serious offense, chances are that he will be suspended from duty at the very least.

The 71-year-old has been under investigation for allegedly wiring 5 billion won ($4.45 million) to now-jailed businessman Park Yeon-cha in April 2007 through several bank accounts opened in other people’s names.

The punitive action is another brutal blow to the nation’s second-largest financial group, as its top three executives’ futures are all up in the air. Some expect the three will be replaced at a general meeting of stockholders in March next year.

CEO Shin Sang-hoon was suspended from his duties last month for alleged involvement in embezzlement and illegal lending, while Shinhan Bank CEO Lee Baek-soon, the final member of the top three, is involved in a scandal alleging that he took 500 million won from Korean-Japanese shareholders in April 2009.

Recent remarks from the nation’s top regulator are also pointing toward the three executives’ departure.

“Those who caused Shinhan’s power struggle need to take responsibility for it,” Financial Services Commission (FSC) Chairman Chin Dong-soo said.

No matter what penalty Ra receives, he is not likely to complete his term, scheduled to expire in March 2013, because history is not on his side.

Former KB Financial Group Chairman Hwang Young-key stepped down from his post in September last year after receiving a penalty from the FSS for derivatives investment losses during a stint at a rival bank, while former Kookmin Bank CEO Kang Chung-won also resigned in July before facing disciplinary action in August.

“With CEO Shin suspended, a heavy penalty imposed on Ra would stir up the group’s leadership,” a Shinhan official said. “It could pose a big threat to the company.” Ra is now on a business trip to Washington to participate in an International Monetary Fund (IMF) conference.

“We will come up with proper measures to minimize the aftermath of the penalty,” he added.

With Shinhan’s current leadership in crisis, market participants and investors have started talking about the next chairman to replace Ra. As both Shin and Lee are involved in lawsuits, they are likely to be ruled out as candidates.

As a result, those who are not linked to the recent internal feuding are expected to be on the list, including Lee In-ho, the group’s former CEO, Hong Sung-kyun, former CEO of Shinhan Card, and Wi Sung-ho, deputy president of the group.

Among outsiders, non-standing director Ryu Shi-yul and Kim Pyung-joo, a professor emeritus at Sogang University, along with two former government officials, are seen as possible candidates

신한 금융 지주 라응찬 회장이 금융 실명제법 위반으로 금융감독원으로부터 중징계를 통보 받음으로써 신한 금융의 경영 공백이 우려되고 있다.

금감원은 금요일 라회장에 대서 중징계를 결정했다고 얘기했고 제제 위원회는 11월 4일에 열릴 것이다.

금감원의 중징계는 해임, 직무정지, 문책 경고가 있고 중징계를 받은 자는 3년에서 5년까지 금융사 임원으로 부임할수 없다.

금융실명제 위반은 중대위반 사항임으로 라회장은 최소한 자격정지 이상을 받을 것으로 예상된다.