FSS chief had pledged announcement before KB shortlist
Plan still unscheduled even as nomination committee meets Friday
'Coordination done at agency level, but Cheong Wa Dae approval pending'
Concerns grow that delays are eroding reform momentum
Six-year term cap for holding company chairs seen as likely provision
A financial holding company governance reform package that regulators have been developing since late last year remains unpublished, held up by prolonged final consultations with Cheong Wa Dae. Financial Supervisory Service chief Lee Chan-jin recently said the plan would be released before KB Financial Group finalized its shortlist of candidates for the next group chairman. But as of Wednesday, the day before KB Financial's chairman candidate recommendation committee was set to convene, no announcement date had been set.
Inside and outside the financial industry, critics warn that the repeated delays are sapping the momentum behind governance reform.
According to financial authorities, the Financial Services Commission has completed its reform proposal and submitted it to Cheong Wa Dae. However, the final review process — including consultations with the presidential office — has dragged on, preventing the plan from reaching formal approval and public release.
"Coordination at the agency level is in effect complete, but Cheong Wa Dae has yet to give its approval," an FSC official said. "Because this stems from a presidential directive and the president's intentions carry significant weight, it is difficult to predict when the announcement will come."
The prolonged wait has prompted voices within and around the regulatory community to urge that the announcement be expedited. Market fatigue has built up considerably given how long the process has taken, and further delays risk diminishing the plan's practical impact.
Some observers expect a final plan to emerge before the presidential policy briefing scheduled for July 15, though the plan could also be disclosed during that briefing rather than in a separate announcement.
The push for governance reform dates to December last year, when President Lee Jae-myung, at an FSC policy briefing, sharply criticized the process for appointing financial sector CEOs, calling it a "corrupt inner circle."
Regulators immediately formed a task force and pledged to deliver a final reform package by March, when major financial holding companies hold their annual general shareholder meetings.
That March deadline passed without a plan, and a new quarter has since come and gone with still no announcement. The FSC previewed a release in mid-March only to abruptly cancel it — a move that fueled speculation in the market about disagreements between the FSC and the FSS. FSC Chairman Lee Eok-won and FSS chief Lee Chan-jin stepped forward to clarify that the two agencies were aligned on the direction of reform but still discussing specific methodologies, yet the episode left the regulators' earlier pledges looking hollow.
Some analysts argue that the delays have already weakened the reform's impact. At the March shareholder meetings, Jin Ok-dong of Shinhan Financial, Lim Jong-ryong of Woori Financial and Bin Dae-in of BNK Financial all secured reappointment. KB Financial — whose chairman selection process is now well underway — is in effect set to be the first institution directly subject to the new rules.
KB Financial is scheduled to hold its recommendation committee meeting Thursday to finalize and announce a shortlist of six candidates. The group then plans to narrow the field to three candidates on Aug. 27 after roughly two months of evaluation, before settling on a single finalist on Sept. 11.
The reform package is expected to focus on CEO appointment procedures, board independence and improvements to performance-based compensation. A provision that would codify in law a cap on holding company chairmen's total tenure at a maximum of six years — allowing only one reappointment — is being cited as a leading option.
The FSS recently shared findings from a governance review of banking holding companies at an internal control workshop for the banking sector, reiterating the case for reform by pointing to instances where governance best-practice guidelines had been exploited to entrench management.
"It is true that the governance reform issue has lost some steam in the market, partly because the authorities themselves missed the right moment," a financial industry official said. "If substantial discussions have already taken place, the plan should be announced promptly so it can be applied meaningfully to the upcoming selection processes for holding company chairs and bank presidents."
ehkim@heraldcorp.com
