The governance reform proposal for financial holding companies, a major issue in the financial sector, has been stalled for six months. Initially, the plan was to present a revised system addressing CEO selection procedures and board operations between March and April, but no specific announcement date has been set yet. Critics argue that the delays caused by discrepancies between financial authorities and fine-tuning of regulations are weakening the policy's momentum.
As of July 7, the Financial Services Commission and the Financial Supervisory Service have not finalized a schedule for announcing the governance reform plan. A source from the financial authorities stated, "We have been discussing various options with experts, and the reform plan is in its final stages," but added, "We have not yet coordinated the announcement date with the Blue House."
Given the circumstances, there are increasing calls from both inside and outside the authorities to expedite the announcement. Market fatigue is significant, and the longer the delay, the less effective the reforms may become. Currently, it is anticipated that the announcement will occur just before the presidential briefing scheduled for the 15th.
The push for governance reform began last December when President Yoon Suk Yeol criticized the practice of reappointing financial holding company chairpersons as a "corrupt inner circle." The Financial Services Commission and the Financial Supervisory Service launched a task force for governance reform in January, with a presentation initially scheduled for mid-March. However, that schedule was abruptly canceled just hours later, leading to speculation about disagreements among the financial authorities.
Subsequently, the financial sector expected the reform plan to be unveiled on July 2, but that too did not materialize. Shortly after Lee Chan-jin, the head of the Financial Supervisory Service, stated that the announcement would occur before KB Financial Group's shortlist preparation on July 3, the Financial Services Commission responded that "no announcement schedule has been set," indicating a subtle difference in positions between the authorities.
In the financial sector, it is believed that while a draft of the reform plan is largely prepared, final negotiations over specific regulatory levels are ongoing. The reform plan is expected to include measures to enhance the transparency of the chairperson selection process, improve the operation of the nomination committee, strengthen board independence, and refine management succession procedures.
However, there is concern among the financial authorities that excessively restricting the autonomy of financial holding companies could reignite debates over government intervention in private financial management, known as "government-led finance."
The delay in announcing the reform plan has alleviated immediate pressure on financial holding companies. In March, Jin Ok-dong, chairman of Shinhan Financial Group, Im Jong-ryong, chairman of Woori Financial Group, and Bin Dae-in, chairman of BNK Financial Group, confirmed their reappointments. With the upcoming chairperson selection process for KB Financial in November, the likelihood of the new system being applied has diminished, leading to a sense of relief.
A source in the financial sector noted, "The timing of the announcement of the governance reform plan before or after the confirmation of the KB Financial chairperson shortlist will inevitably affect the policy's impact," adding, "Missing the announcement timing is diminishing both the credibility and effectiveness of the policy."
* This article has been translated by AI.
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