The Financial Supervisory Commission (FSC) of Korea announced on March 15 that the financial watchdog will include not only Lee Kun-hee, chairman of Samsung Electronics but his son, Lee Jae-yong, vice chairman of the company as major shareholders.
First of all, the FSC will significantly expand the scope of eligibility for major shareholders of financial companies. Currently, a subject is limited to one investor in an eligibility examination, but subjects will be expanded to shareholders with special relationships with the largest shareholders and major shareholders who are influencing the financial company.
Examination criteria will be toughened. It will be recognized as reasons for disqualification not only if a major shareholder is found guilty not only for violations of the financial, tax punishment and fair trade acts but if he or she receives an incarceration or tougher sentence for embezzlement and bribery among others.
In the financial sector, financial authorities are expecting the improvement plan will give rise to a watershed where a government control will spread not only to the financial industry but to the business world. This is because the expansion of the government's eligibility criteria for major shareholders has major financial firms in cross hairs.
In particular, among the top 10 Korean companies, main targets will be chaebol owners, who have even small stakes in financial subsidiaries such as Samsung, Lotte, Hyundai Motor, and Hanwha.
The plan will make it obligatory for not only Lee Kun-hee, chairman of Samsung Life but also vice chairman Lee Jae-yong, an affiliate person, to receive qualification reviews once per two years. Shin Dong-Bin, Lotte Group chairman, who is also a major shareholder of Lotte Insurance among others, will be subject to the new regulation, too.
However, if any one of the largest shareholders is disqualified, part which exceeds 10% of the voting right of the largest shareholder will be limited, so the new rule will not impose any special sanctions on vice chairman Lee Jae-yong whose current stake is 0.06%.
The financial sector is expressing its concern that financial authorities’ investigation of the Hana Financial Group will expand into the overall financial industry.
"I think that the probe is being used to take control of large corporations' financial affiliates as well as financial institutions,” said an official at a financial affiliate of a big business group. “The government may control banks whose equities belong to the government such as the Industrial Bank of Korea. But the government is trying to control private financial companies although the government does not have any stake in them.”
"Will it be impossible for CEOs of financial companies to be reappointed without a rapport with the government?" said a high-ranking official of a Seoul-based commercial bank. “They will have stronger self-protectionism, trying to keep over this time while keeping a low profile. Lobbies for actual power holders will increase.”
In addition, "I will not limit the number of investigators and the period of time in the investigation of Hana Bank," said FSC chairperson Choi Jong-koo in a meeting of the National Assembly's State Affairs Committee on March 13. This means that chairperson Choi declared that the probe of Hana Bank will continue with no deadline set. Those in the financial industry are concerned about Choi’s remark. "Even chairperson Choi had such a real intention, it is inappropriate for him to make the statement as head of the FSC. The utterance has impeded an investigation into corruptions in hiring new employees," said a high-ranking official of a commercial bank.