[비즈한국] The Financial Supervisory Service (FSS) is delaying the announcement of its regular inspection results for Woori Financial Group316140 and Woori Bank. The FSS had originally planned to release the results last December. However, the announcement was postponed to this January, and recently, it was pushed back again to February. Amid the current chaotic political climate, there is growing speculation that there has been a shift in the FSS's policy direction.
The FSS launched its regular inspection of Woori Financial Group and Woori Bank last October. Woori Financial Group and Woori Bank were not originally scheduled for a regular FSS inspection last year. The financial sector believes that the inspection schedule was moved forward because of the controversies surrounding the Woori Financial Group. Last year, financial accidents occurred in succession at Woori Bank, and allegations of improper loans involving former Woori Financial Group Chairman Son Tae-seung also surfaced.
The FSS had planned to complete the inspections of Woori Financial Group and Woori Bank by last December. However, when December arrived, it abruptly stated, “Taking into account the current economic situation and financial conditions, the announcement of major inspection results for financial institutions, including Woori Bank, will be postponed until early next year (2025).” On January 8, it further communicated, “The timing for announcing the results of the inspections of major financial holding companies and banks has been adjusted to early February due to the National Assembly’s insurrection parliamentary investigation, government work report schedules, and the designation of temporary public holidays.”
As the FSS announcement is delayed, uncertainty surrounding Woori Financial Group has increased. Woori Financial Group signed a contract to acquire Tongyang Life Insurance and ABL Life Insurance last August and is waiting for the financial authorities' approval procedures.
For a financial holding company to incorporate a financial firm as a subsidiary, it must receive a rating of 2 or higher in the FSS's management status evaluation. The FSS conducts a regular inspection and then assigns a management status evaluation score based on its findings. Since Woori Financial Group has recently been embroiled in various controversies, there is a possibility that its rating could fall to a level 3. In that case, Woori Financial Group’s acquisition of Tongyang Life and ABL Life could be aborted.
A financial industry official said, “From Woori Financial Group’s perspective, no matter what the results are, they need the inspection results to come out quickly so they can prepare follow-up measures,” adding, “Even if the management status evaluation rating is maintained at level 2, the opportunity cost resulting from the delay in acquisition cannot be ignored.”
Woori Financial Group Chairman Yim Jong-yong has continuously emphasized "strengthening non-banking sectors" since taking office in March 2023. The acquisition of Tongyang Life and ABL Life is a key task for strengthening Woori Financial Group's non-banking presence. Therefore, if the acquisition fails, it will cause a setback in Chairman Yim’s non-banking strengthening roadmap. Chairman Yim Jong-yong’s term ends in March 2026. There is not much time left to review the roadmap from scratch. Woori Financial Group has not made a specific statement regarding the FSS inspection.
In the midst of this, an unexpected variable has recently emerged. There is analysis suggesting that the FSS has lost its influence following the emergency martial law crisis. FSS Governor Lee Bok-hyun has been known as a close aide to President Yoon Suk Yeol, often called the president’s "inner circle." However, with the motion to impeach President Yoon being upheld, the assessment is that Governor Lee’s influence is no longer what it used to be.
Changes have also occurred within the FSS. In an end-of-year reshuffle, the FSS reassigned 74 out of 75 department heads. Previously, at the end of 2023, the FSS had replaced 68 out of 81 department heads. Considering Governor Lee Bok-hyun’s wavering position and the need for operational continuity, setbacks in operations appear inevitable for the time being. During a National Assembly National Policy Committee hearing last December, Governor Lee Bok-hyun explained, “We have maintained continuity by moving team leaders in charge of specific tasks to the position of director.”
Governor Lee Bok-hyun was also embroiled in controversy last December 3 regarding a meeting of the F4 (the emergency macroeconomic and financial meeting with Bank of Korea Governor Rhee Chang-yong and Financial Services Commission Chairman Kim Byung-hwan) where he allegedly discussed "note" instructions from President Yoon Suk Yeol. In response, the FSS refuted this on January 8, stating, “Claims that we discussed the contents of a note related to emergency martial law (at the F4 meeting) are completely false.”
If the FSS falls into chaos, the situation works in favor of Woori Financial Group, as the FSS will lack the bandwidth to focus its efforts on the inspection. In fact, the atmosphere around Woori Financial Group is not entirely negative. Although the prosecution requested an arrest warrant for former Chairman Son Tae-seung last December, it was dismissed. Negative public sentiment toward Governor Lee Bok-hyun is also flowing within the financial sector. The Korean Financial Industry Union (KFIU) publicly criticized him in a statement last August, saying, “Since the beginning of his term, Governor Lee Bok-hyun has focused on taming the financial sector for political purposes rather than performing the FSS's inherent duties.”
There are even suspicions that the announcement was delayed because there were no major issues at Woori Financial Group. If the FSS rushed the inspection schedule but failed to uncover any significant problems, it could face criticism that the inspection was excessive. The FSS denies these suspicions. Regarding the delay of the Woori Financial Group inspection announcement last December, Governor Lee Bok-hyun stated, “We postponed it to ensure that the market and the public are aware of the 'spicy' consequences according to principles,” adding, “This does not mean that our perception of the severity of the illegal acts uncovered during the inspection has changed, or that we intend to treat them lightly.”