Financial Authorities Sharply Target Lim Jong-ryong and Cho Byung-kyu Over Woori Bank's Improper Loans

Regarding the improper loan incident involving relatives of Sohn Tae-seung, former chairman of Woori Financial Group, the financial supervisory authorities have sharply targeted Lim Jong-ryong, the current chairman of Woori Financial Group, and Cho Byung-kyu, president of Woori Bank. Despite having direct or indirect knowledge of the full details of the incident, the supervisory authorities, having received separate reports, allegedly attempted to conceal the matter by not reporting it until the inspection results were announced.

Woori Bank has raised both the upper and lower limits of its 5-year fixed-rate mortgage loan interest rates by 0.11%, while Shinhan Bank plans to increase its mortgage loan interest rates by 0.05% starting from the 15th. The photo shows a Woori Bank branch in Seoul. Photo by Jinhyung Kang aymsdream@

On the 26th, according to the financial sector, Lee Bok-hyun, governor of the Financial Supervisory Service (FSS), appeared on the Korean Broadcasting System (KBS) program 'Sunday Diagnosis' the day before and stated regarding the possibility of sanctions against Chairman Lim and President Cho, "Someone must take responsibility for the delayed reporting of the (former Chairman Sohn’s improper loan) incident." This followed his recent statement at an executive meeting that "Given the behavior shown by Woori Financial Group, it is becoming increasingly difficult to trust them," directly targeting Chairman Lim and President Cho.

The FSS considers that Chairman Lim and President Cho are not free from responsibility in this improper loan incident involving former Chairman Sohn. The period during which the improper loans were made overlaps with the terms of Lim and Cho, ending in January of this year. Moreover, despite having direct or indirect knowledge of the full details of the incident, they did not report or disclose it until the supervisory authorities announced their inspection results.

According to the FSS, Woori Bank became aware that the improper loans were related to relatives of former Chairman Sohn around September to October of last year. The bank’s management was also informed around the same time. The holding company’s management recognized the involvement of Sohn’s relatives during the process of receiving the personnel council agenda reflecting the audit results of the incident in March of this year.

However, the supervisory authorities perceive that Woori Bank and Woori Financial Group consistently delayed their response. The internal audit only began in January of this year, after the head of the department responsible for the loans retired in December of last year. Although disciplinary actions against those involved were taken in April, these were not reported to the supervisory authorities. The FSS, having received a separate tip-off, announced the audit results around 4:30 p.m. on the 9th, after which the related individuals were reported to investigative agencies, and about two weeks later, the financial accident was posted on the company’s website.

The board of directors was also 'passed over.' The FSS stated that the current management was aware of the improper loans involving former Chairman Sohn’s relatives but did not properly report this to the board or the audit committee. The FSS pointed out, "Since last year, we have continuously emphasized the importance of the board’s function through regular meetings with outside directors and the announcement of best practices in governance," adding, "Such behavior by Woori Financial Group seriously undermines the purpose and efforts of governance improvements jointly promoted by the FSS and the banking sector."

This sharp focus by the FSS appears to be aimed at Woori Financial Group and Woori Bank’s initial response to the incident. Initially, Woori Bank stated that it did not report the incident to the supervisory authorities because "this matter pertains to credit screening deficiencies and thus there is no obligation to report." Regarding whether former Chairman Sohn was aware beforehand, they said, "Procedurally, the chairman has no room to intervene." An FSS official criticized this as "a statement difficult to understand from a common-sense perspective."

Governor Lee expressed strong concerns about Woori Financial Group’s response, saying, "More than a year has passed under the new holding company chairman and president system, yet the way the situation is being handled repeats past bad practices," and added, "There is a need to clarify the facts through an inspection." This effectively targets the responsibility of Chairman Lim and President Cho.

Within the financial sector, it is expected that this incident could affect the overall schedule of Woori Financial Group, which is currently expanding its portfolio. Woori Financial Group, which is conducting due diligence for the acquisition of Dongyang Life Insurance and ABL Life Insurance, must undergo the regulatory suitability review for major shareholders even if it decides to proceed with the acquisitions. Furthermore, the positions of the CEOs involved in this incident, including Chairman Lim and President Cho, are also drawing attention. President Cho, who is serving the remaining term of former President Lee Won-duk, will see his first term expire at the end of this year, while Chairman Lim, who recently passed the midpoint of his term, will serve until March 2026.