Domestic Banks Fined 3.1 Billion Won in China Last Year... Domestic Chinese Banks Receive Only 'Warnings'

Uri, Hana, Kieop Bank Chinese Subsidiaries Undergo Intensive Investigation
Only One Sanction Against Chinese Financial Firms Operating Domestically Last Year

Last year, local subsidiaries of domestic banks in China faced a 'fine bomb' after intensive investigations.

According to the Financial Supervisory Service's electronic disclosure system on the 14th, Chinese financial authorities imposed fines totaling 17.43 million yuan (approximately 3.09 billion KRW) on the local subsidiaries of Woori Bank, Hana Bank, and Industrial Bank of Korea last year.

In the case of Woori Bank's China subsidiary, in April last year, the State Administration of Foreign Exchange of China imposed a fine of 200,000 yuan (approximately 36 million KRW) for errors in international balance of payments reporting and statistical reporting. In June, the Beijing Banking and Insurance Regulatory Bureau fined them 900,000 yuan (approximately 160 million KRW) for inadequate verification of the use of personal business loans and negligence in handling foreign currency payment guarantees.

For Hana Bank's China subsidiary, in September last year, the Guangdong branch of the State Administration of Foreign Exchange fined them 15.76 million yuan (approximately 2.82 billion KRW) for negligence in handling foreign currency payment guarantees. This is the largest single fine ever imposed by overseas financial authorities on Hana Bank since the launch of the integrated Hana Bank (Hana and Korea Exchange Bank).

The Suzhou branch of Industrial Bank of Korea's China subsidiary was also fined 570,000 yuan (approximately 102 million KRW) in August last year by the Suzhou Foreign Exchange Administration for reasons including omission of external reporting and insufficient verification of remittance data.

This is not the first time Chinese financial authorities have imposed strict sanctions. In 2021, the People's Bank of China fined Woori Bank China 1.98 million yuan (approximately 350 million KRW) for failure to comply with customer identification obligations. The former head of the subsidiary was separately notified of a fine of 41,000 yuan (approximately 7 million KRW) related to this. Hana Bank was also fined 3.5 million yuan (approximately 620 million KRW) and required to take corrective measures by the Beijing Banking and Insurance Regulatory Bureau in 2021 due to internal control issues related to business property loans.

As strict sanctions from Chinese financial authorities continue, domestic banks are facing difficulties in local operations. As of 2019, the number of branches of domestic financial companies in China totaled 59 (including 16 banks), surpassing the United States (54) to become the highest. A representative from a commercial bank said, "In China, the financial market openness is low, and financial authorities closely monitor and control foreign banks to the extent that even minor issues like incorrect paragraph division in documents are raised as problems," adding, "It is an environment where growth as a foreign bank is not easy."

Meanwhile, among Chinese financial companies operating domestically, the Bank of China Seoul branch was the only one sanctioned by authorities last year. The Financial Supervisory Service found a violation of the obligation to report large cash transactions during an inspection of the Bank of China Seoul branch and issued a 'warning' sanction to one employee in June last year.