South Korea's Financial Services Commission reaffirmed on the 29th its plan to institutionalize financial holding company governance reforms through amendments to the Financial Company Governance Act, according to statements made during a National Assembly Policy Committee briefing. FSC Chairman Lee Eok-won confirmed the legislative approach in response to questioning from People Power Party lawmaker Song Eon-seok, stating that the Financial Company Governance Act serves as the legal basis and will undergo amendment procedures. The reform initiative follows President Lee Jae-myung's criticism late last year of financial sector CEO appointment structures as a 'corrupt inner circle,' which prompted the FSC to launch a Financial Holding Company Governance Advancement Task Force.
FSC Chairman Confirms Financial Company Governance Act Amendment Approach
FSC Chairman Lee Eok-won stated during the National Assembly Policy Committee briefing on the 29th that "the Financial Company Governance Act exists as the legal basis, and the procedure will involve amending that law." The chairman's remarks came in response to questions from lawmaker Song Eon-seok about the legal framework for implementing governance reforms. Financial authorities are currently preparing governance improvement measures designed to prevent long-term control by financial holding company chairmen and strengthen board independence.
Reform Proposals Target Chairman Term Limits and Independent Director Systems
Core elements being discussed in the reform proposals include limiting chairmen to three consecutive terms, operating executive nomination committees centered on independent directors, and strengthening oversight functions of institutional investors. The improvement plan is scheduled to be announced soon. The FSC originally planned to announce the reform measures in March, but the timeline has been delayed multiple times as discussions lengthened following a shift toward legislative amendment as the implementation method.
Lawmaker Questions Whether Reforms Replace Existing Inner Circle
Lawmaker Song Eon-seok raised concerns during the briefing, stating: "Looking at how the BNK Financial chairman appointment process inspection and governance reforms are being pursued after the President mentioned the financial sector's 'corrupt inner circle,' there are concerns that rather than eliminating the existing inner circle, a new inner circle for the regime is being created." President Lee Jae-myung criticized the financial sector CEO appointment structure as a 'corrupt inner circle' late last year, after which financial authorities launched the Financial Holding Company Governance Advancement Task Force.
FSS Chairman States BNK Inspection Results Pending Finalization
Lawmaker Song also referenced the Financial Supervisory Service's inspection of BNK Financial Group's chairman appointment process, demanding submission of inspection grounds and internal review materials while noting that "the public thinks the inspection has been ongoing for over seven months." FSS Chairman Lee Chan-jin responded: "We are organizing the results and plan to proceed with procedures soon," but added that "officially, results have not yet been released."
National Pension Service Role Clarified as Shareholder Rights Exercise
When lawmaker Song pointed out that measures to strengthen the role of institutional investors such as the National Pension Service could undermine the pension fund's principle of non-interference in management, FSC Chairman Lee clarified: "It is not that the National Pension Service will intervene in management, but rather a procedure where shareholders propose recommendations in the process of recommending outside directors. I don't think the concern is at that level." The government stated that governance improvement measures being pursued for the financial sector will be institutionalized through legislative amendments, and the National Pension Service's role will be pursued within the scope of shareholder rights exercise.
FAQ
What governance reforms is South Korea's FSC pursuing for financial holding companies?
The Financial Services Commission is preparing reform measures that include limiting financial holding company chairmen to three consecutive terms, operating executive nomination committees centered on independent directors, and strengthening oversight functions of institutional investors such as the National Pension Service. FSC Chairman Lee Eok-won confirmed on the 29th that these reforms will be institutionalized through amendments to the Financial Company Governance Act.
Why did South Korea launch financial sector governance reforms?
The reform initiative followed President Lee Jae-myung's criticism late last year of financial sector CEO appointment structures as a 'corrupt inner circle.' After the presidential criticism, financial authorities launched a Financial Holding Company Governance Advancement Task Force to develop governance improvement measures. The FSC originally planned to announce reform proposals in March, but the timeline has been delayed as the approach shifted toward legislative amendments.
How will the National Pension Service's role in governance reforms work?
FSC Chairman Lee Eok-won clarified on the 29th that the National Pension Service would not intervene in management but would propose recommendations in the process of recommending outside directors as part of shareholder rights exercise. The chairman stated this approach would not undermine the pension fund's principle of non-interference in management, as it operates within the scope of normal shareholder rights.
