All from same neighborhood
Kyungnam High School alumni rule banking industry
By Kim Tae-jong
The Korea’s financial industry has made remarkable progress over the past decade as domestic banks embraced wholesale restructuring following the 1997-1998 currency crisis. In many aspects they now have parity with their Western counterparts.
However, the industry backpedaled recently as former bureaucrats with similar regional backgrounds were appointed to top posts in major banking groups, which many believe signals the advent of a new era of ‘financial nepotism.’
The replacement of CEOs at the six largest financial holding companies was completed Wednesday, when Shin Dong-kyu, former chairman of the Korea Federation of Banks, was appointed the new chairman of Nonghyup Financial Group.
The most notable thing in this series of replacements is that all the new CEOs are from the nation’s southeastern region and three of them even went to the same high school. They all share a similar career background.
The newly-appointed chairman of Nonghyup Financial Group is from Geoje, South Gyeongsang Province and graduated from Kyungnam High School and Seoul National University.
Shin started his bureaucratic career at the Finance Ministry after passing the 14th Higher Civil Service Examination.
He worked as the first commissioner of the Korea Financial Intelligence Unit and head of the Korea Export-Import Bank. He also served as chairman of the Korea Federation of Banks (KFB) until November last year.
But chairmen at five other major financial groups also share many things in common with Shin as all of them are either from Busan or other parts of South Gyeongsang Province.
Hana Financial Group Chairman Kim Jung-tae, who took office last March, is from Busan and graduated from Kyungnam High School as did Shin.
Korea Development Bank (KDB) Financial Group Chairman Kang Man-soo, who is from Hapcheon, also attended the same high school.
Three other new chairmans ― Shinhan Financial Group Chairman Han Dong-woo, KB Financial Group Chairman Euh Yoon-dae and Woori Financial Group Chairman Lee Pal-seung ― are also from the nation’s southeastern region.
There are also many heavyweights within the financial sector from the same part of the country. Financial Services Commission Chairman Kim Seok-dong, new KFB chairman Bahk Byeong-won and new Hana Bank CEO Kim Jong-jun are all from the nation’s largest port city.
Many CEOs at banks also graduated from a small group of universities. Among 17 CEOs in the financial sector, five went to Seoul National University, four from Korea University and another four from Sung Kyun Kwan University.
Another thing that heads of the banking sector have in common is that they began their careers as bureaucrats.
Shin at Nonghyup, Kang at KDB, Korea Exchange Bank CEO Yun Yong-ro, Eximbank CEO Kim Yong-hwan and KB Financial Group President Lim Young-rok all passed the civil service examination and worked at the finance ministry.
To mock and criticize the dominance of bureaucrat-turned CEOs in the financial sector, industry insiders have coined a new word, “MOFIA,” to refer them. MOFIA is the combination of MOF, which is an abbreviation of Ministry of Finance, and Mafia.
In this regard, Nonghyup’s labor union strongly opposed Shin’s nomination, arguing that the government would interfere in the management after appointing a pro-government figure as chairman.
They also raised allegations that the government pushed forward with a plan to designate another “MOFIA” at Nonghyup because former Nonghyup Financial Group chairman Shin Choong-shik all of sudden offered to resign less than 100 days after he took office, which the union claims was a decision forced by the financial authorities.
In fact, the Lee Myung-bak administration has long been criticized for showing favoritism and appointing people from the Gyeongsang provinces educated at Korea University and who attend the Somang Presbyterian Church in southern Seoul to important positions, because the president himself fulfils all three criteria.
“Whether it is an intended result or simply a coincidence, it looks so bad to appoint all the CEOs at the major financial groups from the same region. It obviously lacks balance,” a high-ranking official in a financial firm said.