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| Shinhan Financial Group Chairman Cho Yong-byoung |
By Lee Kyung-min
Shinhan Financial Group will appoint two outside directors recommended by foreign investors, in a move to better reflect concerns voiced by large shareholders seeking greater representation in the lender's decision-making.
They are Seoul National University Law School professor Lee Yong-guk, an attorney at Cleary Gottlieb Steen & Hamilton; and Sungkyunkwan University professor of mechanical engineering, Choi Jae-boong.
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| Choi Jae-boong |
Lee, a financial and legal expert, was recommended by Affinity Equity Partners, a pan-Asian private equity firm (PEF), and Choi, an ICT expert, by Baring Private Equity Asia, its Hong Kong-based peer.
The two firms were foreign PEFs involved in the group's paid-in capital increase of 1.2 trillion won ($1 billion) in 2020.
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| Lee Yong-guk |
The two foreign PEFs alongside IMM Private Equity, a Seoul-headquartered local player, are rapidly emerging as major shareholders, with the combined stakes of the three standing at around 7 percent, the second largest after the NPS. IMM's paid-in capital was 750 billion won in 2019, about 3.7 percent of the total.
The increase in paid-in capital initially boded well in terms of promoting the financial soundness of the group, with the Common Equity Tier 1 (CET1) ratio, measured by a financial firm's capital divided by its assets, expected to soar to its target of 12 percent from 11.42 percent as of June 2020.
A measure of capital introduced in 2014, the ratio serves as a precautionary means to protect the economy from a financial crisis. Financial firms are required to meet a certain minimum ratio, since equity is taken first from Tier1 in the event of a crisis. The Financial Services Commission (FSC) recommends the ratio be maintained at no less than 8 percent.
But the group's ratio stood at 11.7 percent as of 2020, falling short of the target of 12 percent announced in September 2020. That was mostly due to money spent on strengthening the non-banking sector and investment into its smart technology and investment subsidiaries.
Also causing the ratio to decline was the group's 179.8 billion won stock buyback in the first half of 2019 and 264.3 billion won during July to September of that year to complete the acquisition of Orange Life, formerly ING Life Insurance Korea.
Whether the 12-percent target will be achieved this year remains to be seen, since the group plans to augment non-interest income while expecting assets to increase following possible mergers or acquisitions.
