The Financial Services Commission is set to begin its third review related to the merger and acquisition (M&A) of Tongyang and ABL Life Insurance by Woori Financial Group. Considering that most agenda items typically undergo two to three reviews before reaching a regular meeting, a conclusion on the final approval is expected as early as this month. However, the Financial Services Commission is maintaining a cautious stance. The Financial Supervisory Service has downgraded the management performance evaluation rating of Woori Financial to a level that disqualifies it from subsidiary incorporation approval, making it a situation where significant pressure will be felt regarding granting 'conditional approval.'
According to the financial sector, the Financial Services Commission will hold the third subcommittee meeting on the agenda for Woori Financial's subsidiary incorporation evaluation on the 24th. If there are advancements in discussions in the third subcommittee, it is highly likely that the agenda will be presented at the regular meeting on the 30th, resulting in a final conclusion. If a resolution is not reached in the third subcommittee, it will need to be re-discussed in the agenda subcommittee next month before going through the regular meeting. Regular meetings are held twice a month.
Earlier, the Financial Services Commission held two subcommittee meetings on the 27th of last month and the 10th of this month to discuss the acquisition of the insurance company by Woori Financial but was unable to reach a conclusion. The core issues are Woori Financial's internal controls and improvements to the capital ratio. Woori Financial is taking multiple follow-up actions, including establishing an ethics and internal control committee within its board of directors to improve internal controls, which caused the downgrade in the management performance evaluation rating. Additionally, it is focusing on raising the common equity Tier 1 (CET1) ratio, a measure of management soundness. A financial authority official noted, “Time is needed not only for the improvement of problematic items but also for the review of business plans after the insurance company acquisition.”
The Financial Services Commission emphasizes 'fair and thorough examination.' Kim Byeong-hwan, the chairman of the Financial Services Commission, stated at a press conference last month, "We will closely examine the factors that led to the downgrade to level 3 and assess whether there is a possibility to meet the requirements again and if there are any corrective measures." Although the Financial Supervisory Service has downgraded Woori Financial's management performance evaluation rating to level 3, solid evidence must support the approval for the insurance company acquisition. While this presents a significant burden for the Financial Services Commission, the potential loss of the contract deposit of 155 billion won paid by Woori Financial if the deal falls through raises concerns about a drain on national wealth, increasing the likelihood of conditional approval.
The final approval from the Financial Services Commission is not expected to extend beyond June. If discussions carry over into June, political variables following the early presidential election on June 3 could influence the approval outcome. Additionally, the imminent expiration of the terms of some commissioners participating in the regular meeting also adds pressure, as Kim So-young, the vice chairman of the Financial Services Commission, and Lee Bok-hyeon, the head of the Financial Supervisory Service, have terms ending on May 16 and June 6, respectively.