South Korea's Financial Supervisory Service will closely examine how financial holding companies appoint heads of their subsidiaries ahead of the year-end season for chief executive appointments in the financial sector.

Lee Chan-jin (이찬진), governor of the Financial Supervisory Service, said at an executive meeting on Monday that several financial holding group subsidiary CEOs, including bank heads, are scheduled to be chosen by the end of this year and that parts of the current succession system need to be adjusted.

The regulator said it sees problems in candidate management and the screening process. It also included the level of subsidiary boards’ involvement in personnel decisions as an area to be checked.

The watchdog said there are not many cases where information on CEO candidates managed by a holding company-level nomination body is shared with subsidiaries, or where bank executive nomination committees are given the authority to recommend candidates.

The regulator plans to encourage firms to strengthen related procedures and record management so it is possible to confirm what grounds were used for identifying and narrowing down candidates, screening them and producing evaluation results.

It is also considering ways to prevent CEO appointments at financial companies from becoming a closed structure swayed by some personal networks or internal factions. The regulator has discussed related institutional improvements in the "governance advancement TF" launched in January, and plans to check whether actual appointment processes are run according to objective standards.

Lee also stressed that financial companies should treat management succession systems not as a simple personnel procedure but as a governance issue linked to shareholder value.