SEOUL, March 22 (Yonhap) -- A month after the inauguration of the Park Geun-hye government, South Korea's major state-owned and private bank holding companies are widely expected to undergo a sweeping shake-up of their chiefs, which analysts say may be conducted for political reasons.
The prediction comes after Shin Je-yoon, the nominee for the chairman of the policy-making Financial Services Commission (FSC), hinted at such a reshuffle at his parliamentary confirmation hearing on Monday.
"If there is a need for a change, I will make recommendations (to the president)," Shin said in response to a question from Rep. Kim Yong-tae on his intention to recommend the president to replace heads of state-run financial companies even if their terms have not expired.
Asked whether he thinks chiefs at financial firms who were appointed by the former government should step down, Shin made his point more clear by saying, "I expect they'll figure out (what to do) themselves."
Subject to a reshuffle may be heads of state-run financial firms and private companies in which the government has the largest stake, the nominee said.
Shin Je-yoon, the nominee for the chairman of the Financial Services Commission (FSC), South Korea's financial watchdog, speaks at his parliamentary confirmation hearing on March 18, 2013. (Yonhap file photo)
Analysts said chief executives at state-owned Woori Finance Holdings Co., second-largest KB Financial Group Inc. and state-run KDB Financial Group Co. will likely be forced to "make a graceful retreat."
Woori Chairman Lee Pal-seung, whose term in office will end in a year, is widely expected to be replaced. Lee has been partly blamed for Woori Finance's consecutive failures to privatize the firm. Woori, South Korea's No. 1 banking group by assets, received 12.7 trillion won (US$11.3 billion) in public funds in the wake of the 1997 Asian financial crisis.
Euh Yoon-dae, the chairman of KB Financial, is under pressure from the government to step down. Euh, along with Lee and KDB Financial Group Chairman Kang Man-soo, is known as a close aide of former President Lee Myung-bak.
Euh, whose term expires in four months, has been pressured to step down early after the local financial regulator began to look into allegations that a KB Financial executive leaked false information to U.S. proxy advisory firm Institutional Shareholder Services Inc. in a bid to prevent the re-appointment of several outside board directors, who opposed the banking group's takeover of ING Life Korea.
The information leak has raised concern over Euh's leadership, giving more ground for the government to consider replacing him, market watchers said.
KDB Financial Chairman Kang is not immune from the pending executive shake-up either, they said. His ambitious attempt to take KDB Financial public has fizzled out.
"It seems Woori and KB are quite agitated about the whole issue, and I heard that Euh is firm about staying put," said an official from the Financial Supervisory Service (FSS), the executive body of the FSC, asking not to be named.
"If Euh decides to resign, the other two will have no other choice but to follow suit. It does not matter whether or not they want to do so," he added.
Analysts said the issue of replacing heads of major financial firms shows that the government still wields great influence of the financial sector, raising the question of cronyism.
FSC Chairman nominee Shin said the two criteria for the replacement will be whether heads of such financial firms are on the same wavelength as the new government and whether they are well qualified for the job.
Market watchers said his remarks allude to a sweeping reshuffle since President Park would prefer to have people close to her be in charge of major financial companies.
But some others predict Kang may be able to keep his top post at KDB Financial since the Park administration believes Kang is the right person to push for the firm's privatization. Kang has apparently said, "(I) will abide by the government's line of policy," according to people familiar with the matter.