[Newsmaker] Woori Bank scandal sets off leadership alert in banking industry

Woori Bank’s recruiting scandal is not only causing a major setback to its decadeslong aspiration for complete privatization, but also bringing renewed attention to alleged irregularities surrounding other major banking groups, many of whose leaders are seeking re-election.

The bank‘s plan to sell out remaining government stakes has been facing setbacks, mainly due to the latest scandal that it had offered special favors to children of high-profile officials and VIP clients in last year’s open recruitment.

Despite his role in spearheading the bank’s buoyant performance since taking office in 2014, CEO Lee Kwang-goo offered his resignation last week, taking responsibility for the scandal.

Though he is to hold his official title until the selection of a successor, the top chief‘s retreat has left the bank with a leadership vacuum, especially concerning the ongoing privatization.

“Due to the recent emergency situation, there has been a fiasco in the original plan to sell off (all government stakes) within the year,” said Park Kyung-seo, co-chairman of the Public Fund Oversight Committee.

According to the budget bill submitted Sunday by the Ministry of Strategy and Finance to the National Assembly, Korea Deposit Insurance Corp. is set to sell off some 47 million shares or 7 percent of its ownership of Woori Bank next year.

But the disposal, which is estimated to amount to 500 billion won ($447 million), is still far less than half of the government’s current 18.5 percent stake in the feud-ridden bank.

Since the nation’s financial crisis in 1998, a total of 12.8 trillion won of public funds have been put into the bank, of which only 8.3 trillion won has so far been retrieved, according to the oversight committee. The bank’s goal was first to privatize the bank -- which went on successfully last year -- and sell off all remaining state-controlled stocks, before moving on to restructuring the bank into a holding company system.

In the wake of Lee’s resignation, the Seoul Northern Prosecutors’ Office on Friday searched and seized the bank’s training institute in Anseong, Gyeonggi Province, for further evidence on the illicit hiring scandal. Authorities earlier raided the bank’s headquarters, as well as Lee’s residence.

Other major banking groups have also came under fire for alleged irregularities involving their leaders.

Kim Yong-hwan, chairman of the agriculture-backed NK NongHyup Financial Group, is currently facing allegations that he pulled strings to help a high-profile banking official’s son pass the Financial Supervisory Service’s open recruitment last year. Kim was at the time serving as senior vice governor of the watchdog.

KB Financial Group chief Yoon Jong-kyoo, who had previously been anticipated to clinch his consecutive term with little challenge, is also under fire for alleged embezzlement and dereliction of duty.

A civic group filed a charge against Yoon earlier this year, claiming that he illicitly profited some 545 billion won during the process of the group’s acquisition of the industry’s No. 4 player LIG Insurance in 2014.

The related prosecutorial probe recently picked up momentum after KB’s labor union claimed that the management interfered in and manipulated the internal online survey on Yoon’s re-election.

Kim Jung-tai, second-term chairman of Hana Financial Group, is facing a dispute for making a multibillion-won purchasing deal from a company owned by a nonexecutive director, in a purported intention to win the latter’s favor in the upcoming re-election vote.

KB Financial chief Yoon’s term is set to end this month, while the chiefs of Hana Financial and NH Financial are to step down in March and April, respectively, unless they confirm additional terms by then.

The escalating probe into these irregularities also triggered speculation that the Moon Jae-in administration may be seeking to reshuffle financial chiefs who were appointed under the former Park Geun-hye administration.

Deputy Prime Minister and Finance Minister Kim Dong-yeon recently held an urgent ministerial meeting on curbing all recruiting irregularities, which some observers say could be seen as part of such gestures.

By Bae Hyun-jung (tellme@heraldcorp.com)