The CEOs of Korea's top five banks — KB Kookmin, Shinhan, Hana, Woori and NH Nonghyup — are nearing the end of their current terms by the end of this year.
As they have collectively reported robust profits in the first half of this year, their management ability, particularly the execution of internal controls, will influence their reappointment, according to market observers on Tuesday.
The terms of KB Kookmin Bank CEO Lee Jae-keun, Shinhan Bank CEO Jung Sang-hyuk, Hana Bank CEO Lee Seung-lyul, Woori Bank CEO Cho Byung-kyu and NH NongHyup Bank CEO Lee Seok-yong will all expire by the end of this year. Except for KB's Lee, who secured another term last year, all are serving their first terms.
The succession process is scheduled to begin in earnest this September. Financial authorities mandate that all non-state-owned banks initiate their management succession protocols three months prior to the expiration of their CEO's term.
The most closely watched figure is KB's Lee. Although the bank faced the highest loss related to equity-linked securities (ELS) tied to the performance of the Hang Seng China Enterprises Index (HSCEI) in the first half of the year, it made a successful rebound in the second quarter.
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Shinhan's Jung is lauded for his steady leadership after his predecessor, Han Yong-gu, stepped down suddenly for health reasons just a month into his tenure. Under Jung's guidance, Shinhan reclaimed its position as the leading bank in the first half of this year.
Hana's Lee is also credited with elevating the bank's competitiveness in asset management, global business and pensions. Woori's Cho is focusing on corporate finance and asset management, aiming to make the bank the top performer in annual net profit. NH's Lee is achieving positive results in enhancing digital environments.
However, the specter of internal control failures looms large.
Woori Bank, for instance, was rocked by a major scandal in June when an employee embezzled 17.7 billion won ($12.7 million) through fraudulent loan applications.
In March, KB Kookmin Bank experienced embezzlement incidents involving inflated collateral value of real estate, resulting in losses exceeding 10.4 billion won.
NH Nonghyup Bank also has faced financial incidents totaling over 17 billion won, as an employee embezzled 10.9 billion won due to excessive lending. In May, two more embezzlement incidents amounting to 6.4 billion won occurred.
As the Financial Supervisory Service (FSS) recently set guidelines for "best practices for bank governance," the transition of management is expected to be conducted under the financial watchdog's scrutiny. In its regular inspections starting in the second half of this year, the FSS also plans to evaluate banks' efforts to improve corporate governance.
"It is important to find a balance that can satisfy both the authorities' desired policies and the companies' managerial autonomy," an industry official said.