[Column] Woori Bank's Reflection and Apology: Hoping It Won't Be Empty Words

"This is an utterly incomprehensible incident. In at least the past 10 years, I have never heard of such a case. Even if it was under the orders of a superior, if the content is unjust, the individual (employee) cannot avoid disciplinary action, and since multiple departments are involved, it is difficult to conceal. I believe this is less a problem of internal control (system) and more a result of the absence of organizational culture."

This is a candid comment from a banking industry insider regarding the recent improper loan scandal involving relatives of Sohn Tae-seung, former Chairman of Woori Financial Group. It is hard to say this is a harsh judgment just because it is another company. The loans related to Sohn’s relatives, which were about 450 million KRW initially, ballooned over 100 times to 61.6 billion KRW during his tenure as bank president and chairman. Among these, the amount identified as improper loans reached 35 billion KRW. Woori Bank announced that the loss could be as high as 15.8 billion KRW. Notably, many of these loans were led by Director Lim.

The modus operandi is also telling. According to the Financial Supervisory Service’s inspection, Woori Bank failed to verify even when the borrower submitted electronically issued (tax) invoices that were not properly issued as proof of payment during the loan process intended for client payment purposes. Additionally, a relative-related corporation was already in a state of complete capital erosion at the time of the loan, but the bank secured collateral with real estate that had no available value due to a senior mortgage, and upgraded the credit rating to approve the loan. There were also numerous cases where loans were processed at branch level approvals, bypassing headquarters approval procedures.

Since Woori Bank and financial authorities have filed complaints and notifications with investigative agencies, it is difficult to predict the full extent of the fallout. The critical point is that despite calls for 'strengthening internal controls' and 'innovation' after every financial accident, such incidents keep recurring. Previously, after a 70 billion KRW embezzlement by an employee in the Corporate Improvement Department in 2022, Woori Bank initiated institutional reforms such as establishing a Credit Management Headquarters, but it was all in vain.

The current leadership under Lim Jong-ryong, Chairman of Woori Financial Group, is also not free from responsibility. Although the issue was detected through internal audits, just two months ago, a deputy-level employee at the Gimhae branch embezzled 17 billion KRW in loans. The recent scandal involving Sohn’s relatives is similar. Even after Sohn’s retirement in March last year, improper loans continued for about 10 months until mid-January this year. The improper loans were confirmed through internal audits, and the responsible director was dismissed in April, but the financial authorities were not informed for over four months. The complaint against the involved parties was only filed on the 9th after the financial authorities began a full-scale investigation.

Within the industry, many view 'corporate culture' and 'organizational culture' as the true root causes of this incident, beyond systems and personnel. Since the Asian financial crisis, Woori Bank, formed through the merger of the insolvent Hanil Bank and Commercial Bank with public funds, has endured continuous factional conflicts and external political pressures for over 20 years. Every CEO appointment was accompanied by slander and whistleblowing crossing political and governmental lines, and chronic issues such as favoritism and division of spoils were pointed out. The saying goes, "You have to be good at lining up rather than performance to get promoted, so problems arise."

Woori Bank stands at a crossroads of trust. In just the past 2-3 years, deputy-level and assistant manager-level employees have been involved in large-scale embezzlement cases, and now even a director-level manager, who can be considered a 'manager,' has caused a financial scandal related to the CEO. It can no longer be dismissed as just an internal control system failure or individual misconduct. We hope Chairman Lim’s commitment to improving organizational culture will not remain empty words.