From left, KB Kookmin Bank CEO Lee Jae-keun, Shinhan Bank CEO Jung Sang-hyuk, Hana Bank CEO Lee Seung-lyul, Woori Bank CEO Cho Byung-kyu and NH NongHyup Bank CEO Lee Seok-yong / Newsis

The process for selecting new CEOs for domestic banks has now officially started at some banks. With the terms of all five major bank CEOs coming to a conclusion at the end of the year, there is considerable focus on whether they will be retained or replaced.

According to industry sources, the five major banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — are expected to begin their CEO selection processes after the Chuseok holiday. This is in line with the governance guidelines of financial authorities, which require the succession process to start at least three months before the current CEO's term expires.

Among the current heads, KB Kookmin Bank CEO Lee Jae-keun is serving his second term, while Shinhan Bank CEO Jung Sang-hyuk, Hana Bank CEO Lee Seung-lyul, Woori Bank CEO Cho Byung-kyu, and NH NongHyup Bank CEO Lee Seok-yong are all in their first terms.

Market watchers believe that financial crimes and management's handling of internal controls will be key factors in determining their reappointment. In terms of profits, they have collectively reported strong performances during their terms.

The industry's attention has turned to Woori Financial Group and its subsidiary Woori Bank, which were recently embroiled in a scandal involving improper loans.

In early August, the Financial Supervisory Service (FSS) discovered that Woori Bank issued 42 loans totaling 61.6 billion won ($45.9 million) to individuals connected to former Woori Financial Group Chairman Son Tae-seung between April 2020 and January. Twenty-eight of the loans, amounting to 35 billion won, were granted improperly, allegedly, due to Son's influence.

Pressure for a management change has intensified since FSS Governor Lee Bok-hyun publicly emphasized that "someone must be held accountable" for the issue.

The future of KB Kookmin and NH NongHyup's leadership remains uncertain as well, following their failures concerning their internal control procedures.

KB Kookmin Bank experienced embezzlement incidents worth over 10.4 billion won in March. It also recorded the highest level of mis-selling equity-linked securities (ELS) tied to the performance of the Hang Seng China Enterprises Index (HSCEI), which resulted in massive investor losses.

NH NongHyup Bank already recorded four financial negligence incidents so far this year, with two of the cases each resulting in losses of over 10 billion won worth.

Some banks have already kicked off their selection processes. Standard Chartered (SC) Bank Korea convened its recommendation committee, Friday, and selected Lee Kwang-hee, the current managing director and executive vice president, as the incoming CEO.

Suhyup Bank, the fisheries cooperative's banking arm, is set to finalize the shortlist for its next CEO candidates, Thursday, with interviews scheduled for Sept. 23. Six candidates have entered the race so far, including current CEO Kang Shin-sook as well as two current vice presidents.