Will KB Financial Group Chairman Yoon Serve Second Term?

After KB Financial Group Chairman Yoon Jong-kyu took office, the group has suffered from a management chaos, such as off-the-books money and unconscionable bargain, and a series of rumors. Accordingly, such circumstances are having a negative effect on whether Chairman Yoon, whose two-year term ends in November this year, will be able to serve consecutive terms.

According to financial industry sources and prosecutors, an executive at KB Kookmin Bank is under prosecutor's investigation in allegations of accepting an immense amount of money and gifts from an official at an export business and helped him commit a fraud on an export letter of credit in April. Moreover, two employees at KB Investment & Securities were under investigation of the securities crime division at Seoul South District Prosecutors' Office after they caught accepting money for mediating after-hours block deal in September and October last year.

According to data the Financial Supervisory Service (FSS) submitted to Oh Shin-hwan from the main opposition Liberty Korea Party (LKP), there were 38 financial incidents occurred at KB Kookmin Bank between 2012 and 2014 and the damages were worth 440.9 billion won (US$392.82 million). The bank accounted for 62.5 percent of the total damages of 704.8 billion won (US$627.88 million) caused by 162 financial incidents occurred at 18 banks between 2012 and 2104.

With a series of moral hazard problems from KB Financial Group’s employees and executives, Chairman Yoon, who also serves as president of KB Kookmin Bank, is also under fire whether he is capable of managing the group. This adversely affects the speculation that Chairman Yoon can serve consecutive terms as his term ends in November. There is a rumor in the financial industry that Chairman Yoon will resign as president of KB Kookmin Bank and appoint new president of the bank.

As the State Affairs Planning and Advisory Committee of the Moon Jae-in administration presented its plan to raise the quality of internal control and strengthen transparency by improving the governance structure of financial companies, KB Financial Group’s management chaos is highly likely to have negative effects on Chairman Yoon serving consecutive terms.