FSS chief orders post-hoc review of financial groups' CEO succession processes

Fairness, transparency to be checked after year-end financial sector appointments wrap up

Hana finalizes shortlist; NH NongHyup to narrow candidates Wednesday

KB to pick next Kookmin Bank chief by late November; Shinhan targets early December

Financial Supervisory Service Governor Lee Chan-jin. [FSS]

Financial Supervisory Service Governor Lee Chan-jin has instructed his staff to conduct a post-hoc review of CEO selection processes at major financial holding companies' subsidiaries once year-end appointments are complete, checking whether candidates were chosen fairly and transparently in line with pre-established criteria. The directive comes as the country's top financial groups have begun narrowing their shortlists for bank chief executives and other subsidiary heads, signaling that regulators intend to scrutinize not just the outcomes of the appointments but the entire succession process.

According to financial authorities, Lee issued the instruction Monday at a morning meeting of FSS deputy governors, citing concerns about financial holding companies' CEO succession practices raised during a recent National Assembly audit of the Financial Policy Committee.

Lee was quoted as saying that "every effort must be made to ensure that the entire process — from candidate pool selection and vetting to evaluation — is carried out transparently and fairly in accordance with criteria and procedures established in advance."

Lee had already signaled the post-hoc review plan at the National Assembly audit. Responding to calls to verify whether internal control systems had functioned properly during bank chief appointments, he said, "Even before any legislative revision, I will conduct a comprehensive review of the selection procedures currently under way in the banking sector to confirm whether governance improvements are in fact being made."

Lee has consistently raised concerns that financial holding company chairmen wield excessive influence over subsidiary CEO succession processes and that candidate selection lacks transparency. He has also stressed that boards of directors must play a genuine role in checking management.

The FSS plans to examine, once each financial group's succession process concludes, whether it was conducted in keeping with governance improvement guidelines and best-practice standards.

The announcement came as major financial groups moved into full swing with their year-end appointments. Hana Financial Group narrowed the CEO candidate pool for six key subsidiaries — Hana Bank, Hana Securities, Hana Card, Hana Capital, Hana Life and Hana Savings Bank — to no more than three candidates each on Monday. NH NongHyup Financial Group, which launched its succession process last month, is set to finalize a long list of subsidiary CEO candidates on Wednesday.

KB Financial Group is also moving ahead with the selection process for subsidiary CEOs, including the next head of KB Kookmin Bank. When the bank last appointed a new chief in 2024, a subsidiary CEO recommendation committee finalized a shortlist on Nov. 12, then named incumbent President Lee Hwan-joo as the final candidate on Nov. 27. A deeper vetting process by Kookmin Bank's own candidate recommendation committee, followed by board and shareholder approval, continued through December. KB Financial Group is proceeding with its succession timeline this year with a target of selecting the final candidate for the next Kookmin Bank president by late November.

At Shinhan Financial Group, Shinhan Bank's executive candidate recommendation committee is reviewing candidate qualifications and compiling a pool this month, with deliberations on the shortlist continuing through November. The group's subsidiary management committee plans to use those results to select final candidates for the next Shinhan Bank president and other subsidiary heads in early December and recommend them to the respective companies. Subsidiary candidate committees will then conduct further vetting before boards and shareholders give their approval, with the process expected to wrap up within December.

The Financial Services Commission is also working on a government proposal to improve financial holding company governance and is expected to pursue consultations with the ruling party soon.

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