Lee Bok-hyun, Financial Supervisory Service Chief, Holds Meeting with Heads of 20 Domestic Banks
Real Estate PF: Reassessment Required if Financial Firms' Business Feasibility Evaluation Is Inadequate
Savings Banks Management Evaluation: "Failed to Meet Expectations in Managing Rising Delinquency Rates"
Lee Bok-hyun, Governor of the Financial Supervisory Service, expressed the position that the head office of Woori Bank could be held accountable for the embezzlement incident involving employees amounting to around 10 billion KRW.
On the 19th, after a meeting with the heads of 20 domestic banks held at the Korea Federation of Banks building, Governor Lee told reporters, "We have grasped a significant part of the Woori Bank embezzlement case," adding, "We have identified failures not only at the branch level but also at the head office level, and if necessary, we will strictly hold those responsible accountable to the fullest extent within current regulations." An employee, A, who worked at Woori Bank’s Gyeongnam regional branch, was arrested on the 13th for forging loan applications and deposit documents to embezzle approximately 10 billion KRW in loan funds.
Governor Lee also stated that the accountability structure would not be used as a means to evade responsibility. He said, "There is absolutely no intention to use the accountability structure as a way to avoid responsibility," and added, "It will be designed to impose burdens on executives or top-level officials who bear operational responsibility."
He further expressed expectations that the introduction of the accountability structure would reduce incomplete sales. Governor Lee explained, "Since key decision-makers will directly recognize internal control as a related issue, short-term performance-driven practices and incomplete sales are likely to decrease."
Regarding the sorting of real estate project financing (PF), which will be fully implemented from July, he mentioned that opinions have been gathered and the final version of the business feasibility evaluation criteria has been prepared. Financial companies must conduct self-assessments of related real estate PF projects and submit improvement plans to the Financial Supervisory Service. Governor Lee said, "If the self-assessment does not meet the Financial Supervisory Service’s judgment, we plan to strongly urge business feasibility re-evaluation and additional provisioning."
When asked about the possibility of the spread of insolvency among savings banks after the business feasibility evaluation, he responded that the problem was that the insolvency had not been recognized until now. He explained, "It is not an expansion of insolvency but rather that financial companies did not recognize the severity of insolvency, so it was not reflected," adding, "If funding supply is delayed, it could cause issues related to public housing, so the goal is to bring insolvency onto the books and release it into the market in an appropriate manner."
Regarding the management evaluation of the savings bank sector, he said, "There were criticisms that the management of rising delinquency rates did not meet expectations," but explained, "We are confident that there is no shock factor affecting the market and the possibility of spreading to other financial companies or sectors is very low."
Meanwhile, Jo Byung-kyu, President of Woori Bank, who attended the meeting, apologized sincerely for causing concern to customers and the public due to the recent embezzlement incident involving a Woori Bank employee amounting to around 10 billion KRW. He said, "We will take this as an opportunity to strengthen internal controls to prevent such incidents from happening again."
President Jo added, "Although the strengthened internal controls could have prevented this incident internally, the fact that it was not fundamentally stopped shows there were still shortcomings," emphasizing, "We will ensure that such incidents do not recur through effective education for all executives and employees, as well as improvements to the internal control system."
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