Yoon's market-driven policy backpedals

Financial Services Commission (FSC) Chairman Kim Joo-hyun delivers an address during a New Year's meeting with financial industry leaders at Lotte Hotel in downtown Seoul, Jan. 3. Yonhap

Authorities under fire for exerting influence on financial firms

By Yi Whan-woo

The government is bolstering efforts to lift regulations in the finance industry to achieve President Yoon Suk Yeol's vision of a market-driven economy.

But at the same time, financial regulators are apparently ratcheting up efforts to bolster their influence on the management of banking groups, fueling skepticism over the government's commitment to serve the interests of financial firms.

Concerns are rising over double standards in the Yoon administration's market-driven economic vision as financial authorities have been increasingly targeting bank CEOs at a time when their tenures are close to ending.

Among the latest targets was Woori Financial Group Chairman and CEO Son Tae-seung, who was criticized by Financial Services Commission (FSC) Chairman Kim Joo-hyun for "not accepting the FSC's punishment against him concerning sales of risky Lime Asset Management funds by Woori Bank in 2019."

Son had been doubling as the head of Woori Bank and Woori Financial Group back then. The FSC reprimanded Son in November 2022.

The warning is raising suspicions for being issued after Son won a lawsuit against the FSS twice _ at a lower court in August 2021 and at the High Court in July this year _ over a separate case of Woori Bank's mis-selling of high-risk, derivative-linked funds (DLFs), also in 2019.

Financial sources speculate that the Yoon administration is trying to find an excuse to block Son from seeking a third term as CEO when his second three-year tenure ends in March 2023.

The sources noted that the FSC warning bars Son from holding positions at financial companies for three years, although his current term can be completed.

Speculation has become rampant that the Yoon administration wants to replace banking group chiefs, whose current terms were soon to expire mostly in December last year, with pro-government figures.

Against this backdrop, Son has been seeking to take the case to the court as he did in the past.

"And I find Chairman Son's move to counter (the FSS waring) with a lawsuit to be inappropriate," the FSC chairman said on Jan. 6. "I am extremely uncomfortable with Son and his company talking about possible lawsuits in the absence of any discussions on how the company can make an improvement (in relation to the sales of Lime Asset Management funds)."

The government's pressure on Son came as the CEOs of other banking groups, such as Cho Yong-byoung of Shinhan Financial Group and BNK Financial Group Chairman and CEO Kim Jin-wan, dropped out leadership races.

They were widely anticipated to easily secure another term.

"The government's move certainly contradicts Yoon's market-driven economy, as it can prompt financial firms to read the government's intentions when it comes to leadership," a member of the Citizens' Coalition for Economic Justice, a Seoul-based civic activist group, said on condition of anonymity.

"The government's move is also ambiguous considering it looked as if it is fully poised to back the banking industry and real estate market through deregulations," he added.

The civic activist was referring to the FSC chairman's announcement in July 2022 when he highlighted the need to revamp rules that restrict non-financial businesses from owning banks.

Korea restricts industrial capital from being used to purchase stakes in banks and financial institutions in a bid to make it hard for business owners to use them as their private ATMs. Under the rule, businesses can only own up to a 4 percent stake in a bank.

The country's top financial regulator then stressed that the so-called separation of industrial and financial capital constitutes major red tape that hampers financial firms from going digital.

The chairman also emphasized that the government will make efforts to ease regulations to allow local financial companies to do anything their foreign competitors can.

He viewed that all regulations and practices thus should be under review for changes.

Minister of Land, Infrastructure and Transport Won Hee-ryong, right, speaks with Prime Minister Han Duck-soo before his ministry's New Year briefing at the state guest house of Cheong Wa Dae, the former presidential office, in central Seoul, Jan. 3. The ministry announced it will lift property-related regulations in most of Seoul and metropolitan areas beginning on Jan. 5 as an extended measure to revitalize the housing market. Yonhap

Regarding the housing market, the government lifted property-related regulations in most of Seoul and the surrounding metropolitan areas beginning on Jan. 5.

The measure was extended from the previous overhaul of regulations in the housing market that saw a surge in prices, but recently has been cooling down fast due to strict regulations and higher borrowing rates.

All of Seoul and its adjacent metropolitan areas are no longer subject to restrictions except for four districts _ Gangnam, Seocho and Songpa in southern Seoul and Yongsan in central Seoul.

The government also lifted the "apartment presale price cap system," which was regarded as one of the strongest measures taken by the government to clamp down on housing prices.

The system was implemented in 2019 for apartments to be built by private builders amid signs of escalating home prices.