Financial Supervisory Service Gov. Yoon Suk-heun, known as a hard-line reformist of the financial industry, is set to retire next week without resolving a massive misselling scandal involving Korean hedge funds Lime Asset Management and Optimus Asset Management.
Blamed for the watchdog’s lax oversight over the now-defunct hedge fund operators, it is unlikely that Yoon will continue to serve after his term ends on May 7, industry sources said. The alleged fraud cases caused investor losses estimated at 1.5 trillion won ($1.3 billion) and 500 billion won, respectively.
Among the lineup of potential successors are current and former government officials -- Jeong Eun-bo, South Korea’s chief negotiator in defense cost-sharing talks with the United States; Kim Yong-beom, former vice finance minister; Kim Jong-ho, former senior presidential secretary for civil affairs and Kim Keun-ik, FSS’ first senior deputy governor, according to industry sources Friday.
In addition, Kim Eun-kyung, FSS’ senior deputy governor in charge of the financial consumer protection bureau, has been mentioned for the post, along with other market experts in the private sector, including Jung Jae-wook, former CEO of KDB Life Insurance and Choi Woon-yeol, former representative of the Minjoo Party.
Cheong Wa Dae, however, remained mute over Yoon’s replacement so far, despite his looming retirement in less than a week.
Observers say that President Moon Jae-in may nominate the new chief of the financial watchdog after Prime Minister-nominee Kim Boo-kyum’s parliamentary hearing takes place on Thursday.
The FSS governor is recommended by the chairman of its upper body, the Financial Services Commission, and approved by the presidential office.
Yoon, 73, was a visiting professor of business administration at Seoul National University before assuming the leadership at FSS in May 2018.
Upon taking the top post, the former scholar pushed for progressive measures to tighten its grip on local financial institutions.
In 2019, the reform-minded chief revived the FSS’ authority to conduct comprehensive inspections to oversee a financial company’s governance, internal control systems, financial stability and risk management policies.
Under Yoon’s lead, the FSS also conducted a series of studies on the status of consumer protection measures in financial circles in partnership with local research institutions to prompt the government and lawmakers to implement “the Financial Consumer Protection Act,” which came into effect in March this year. The new legislation is aimed at protecting consumers from misselling practices or other financial frauds under stricter legal requirements on financial firms in terms of responsible management.
But despite his best efforts, Yoon still leaves before being able to tie up loose ends of the massive misselling scandal, with sanctions against charged executives yet to be finalized and the victims yet to be compensated.
He came under fire during his second year of office over the FSS’ lack of supervision over the troubled hedge fund operators, into which investigations are still ongoing.
The authority also faced intense backlash from the financial industry as it pushed ahead with heavy sanctions on the heads of the Lime fund sellers, including Shinhan Bank, Woori Bank and Hana bank, as well as local brokerages associated with Optimus Asset Management’s alleged hedge fund fraud.
“The FSS’ move to slap heavy penalties on CEOs of local financial firms is likely to increase uncertainties in the financial market, which would shrink financial company’s business activities,” said Kim Kwang-soo, the chairman of the Korea Federation of Banks.
Yoon’s leadership was again put to the test in March as the FSS labor union urged him to step down to take responsibility for the organization’s failure in personnel management. The market watchdog reportedly promoted two officials in February, who had been punished for their involvement in hiring irregularities.
Without the appointment of a new head, a leadership vacuum is expected, although market observers said it was also possible that the incumbent first senior deputy governor Kim Keun-ik may serve as the supervisory agency’s acting chief for the time being.
By Choi Jae-hee (firstname.lastname@example.org