[비즈한국] This year, the practice of appointing former high-ranking officials from the Financial Supervisory Service (FSS)—the very regulatory body that oversees financial firms—as "parachute" hires continues to take place across the board.
Beyond the argument that the expertise brought by these former FSS officials cannot be viewed entirely negatively, there remains a persistent critical view regarding their move to institutions they previously supervised.
This year, many financial firms have recruited former high-ranking FSS officials through their regular annual general meetings of shareholders. This phenomenon was particularly prominent in KB Financial Group105560, affecting subsidiaries across banking, securities, and insurance.
Starting with the banking sector, KB Kookmin Bank newly appointed Seo Tae-jong, former Senior Deputy Governor of the FSS, as an outside director. Mr. Seo previously served as the Director of the Capital Market Bureau and a standing member of the Securities and Futures Commission at the Financial Services Commission (FSC), the government agency that oversees the FSS, before serving as the FSS Senior Deputy Governor.
Internet-only bank KakaoBank323410 newly appointed Zhin Woong-seob, former Governor of the FSS, as an outside director. Mr. Zhin served as the Capital Market Bureau Director at the FSC, was appointed as the CEO of the Korea Finance Corporation in February 2014, and took office as the 10th Governor of the FSS in November of the same year.
The securities industry is no exception. Samsung Securities016360 brought on Lim Jong-ryong, the former Chairman of the Financial Services Commission, as a new outside director. While Mr. Lim does not have experience working at the FSS, he is considered the biggest heavyweight among the former financial bureaucrats recruited during this year's shareholders' meeting season. He previously served as the First Vice Minister of Strategy and Finance, the ministerial-level Prime Minister’s Office Chief of Staff, Chairman of NH Financial Group, and Chairman of the FSC.
KB Securities appointed Min Byung-hyun, a former Assistant Governor of the FSS, as a new outside director. Mr. Min previously served as the FSS Director of Financial Investment Supervision, Director of Planning and Coordination, and Director in charge of financial investment supervision and examinations.
Hyundai Motor Securities001500 appointed Yoon Seok-nam, the former Director of the Accounting Service Bureau at the FSS, as a new outside director. After retiring from the FSS in 2011, Mr. Yoon served as a standing advisor for Deloitte Anjin and as head of audit for Hi Investment & Securities.
The insurance industry is similar. DB Insurance005830 recently appointed Moon Jung-sook, a professor of Consumer Economics at Sookmyung Women's University who formerly served as the Chief of the Financial Consumer Protection Bureau at the FSS, as a new outside director.
KB Insurance also newly appointed Seo Gyeong-hwan, former Director of the Dispute Mediation Bureau at the FSS, as the head of auditing. After retiring from the FSS, Mr. Seo had served as an executive at the General Insurance Association of Korea—an interest group for non-life insurers—and was re-employed by an insurance firm just one month after stepping down from that position.
Prudential Life Insurance, which was acquired by KB Financial Group last year, appointed Kang Young-goo, a former FSS Assistant Governor currently serving as President of Ethical Management at Meritz Fire & Marine Insurance, as a new outside director. Mr. Kang served as President of the Korea Insurance Development Institute, then as an outside director for Lotte Insurance and at Meritz Fire & Marine, before moving to Prudential Life Insurance three months later.
According to the "Status of Post-Retirement Re-employment (2016-2020)" data obtained from the FSS by Rep. Yoon Chang-hyun of the People Power Party, a member of the National Assembly's National Policy Committee, a total of 79 employees at the rank of grade 4 or higher were re-employed in the private sector following review by the Public Service Ethics Committee over the past five years. Of these, 54 individuals moved into the financial sector.
In particular, the number of former FSS officials re-employed in the financial sector spiked significantly last year. While the numbers were held to 10 in 2018 and 13 in 2019, the figure more than doubled to 31 last year.
Last year was a period when the FSS intensified its investigations and disciplinary procedures against financial firms due to incidents such as the overseas interest rate-linked Derivatives Linked Fund (DLF) scandal, the Lime scandal, and the Optimus scandal. In this regard, there are strong suspicions that financial firms under investigation have increased their hiring of former FSS officials to serve as a "shield" to gain information on the FSS's movements and to exert influence.
In fact, the Korea Development Institute (KDI), a government-funded research institution, stated in its 2019 report titled "Economic Effects of Re-employment of Former Financial Regulatory Officials at Financial Companies" that "the re-employment of former FSS officials at financial companies does not improve the soundness of the firms, but it does reduce the probability of the company or its executives being sanctioned by approximately 16.4%."
Under the current Public Service Ethics Act, former FSS employees of grade 4 or higher are generally prohibited from re-employment at financial companies for three years after retirement. Consequently, most of these individuals work outside the financial sector for those three years before being re-hired into the financial industry.
Anonymous FSS sources noted, "If a former high-ranking FSS official is employed at a financial firm being audited, it is inevitable that difficulties will arise in conducting proper supervision or inspections."