Preliminary Inspections Conducted from the 24th to Conclude on the 30th... Various Data Collection
Inspection Plan Advanced by One Year, Holding Regular Inspections of Holding Companies and Banks... Targeting Completion by November 8
Allegations of Unfair Loans Involving Former Chairman Sohn Tae-seung's Relatives Spread Widely... Serious Trust Damage Assessed
"Plan to Closely Examine Financial Soundness and Operational Risks"
The Financial Supervisory Service (FSS) has announced a regular inspection of Woori Financial Group and Woori Bank one year ahead of schedule. After completing a preliminary inspection that began on the 24th, the FSS is now launching a full-scale inspection with a large number of personnel.
According to the financial sector on the 30th, the FSS concluded the five-day preliminary inspection today and will commence the regular inspection of Woori Financial Group and the bank starting from the 2nd of next month. As this is a comprehensive inspection conducted regularly, the FSS plans to deploy 30 to 40 inspectors from related departments such as the Bank Examination Bureau and the Capital Market Supervision Bureau, aiming to complete the inspection by November 8. Through the preliminary inspection, the FSS received various documents from Woori Financial Group and the bank and is said to have further specified the direction of the regular inspection.
Originally, the FSS had planned to conduct the regular inspection of Woori Financial Group and the bank next year, but it was brought forward amid various financial accidents and the widespread allegations of improper loans involving relatives of former Chairman Sohn Tae-seung. This is interpreted as a result of the FSS judging that there are serious problems not only in the internal control system but also throughout the organizational culture.
In particular, the FSS is focusing on the fact that the improper loan case involving the former chairman’s relatives was confirmed through an internal audit but was reported to the FSS belatedly, and the subsequent handling process was not typical. Kim, a brother-in-law of former Chairman Sohn who is suspected of improper loans, was arrested on charges including embezzlement under the Act on the Aggravated Punishment of Specific Economic Crimes, forgery of private documents, and use of forged private documents only after the FSS announced the inspection results. According to the FSS inspection results, loans amounting to 61.6 billion KRW were executed to relatives of former Chairman Sohn at Woori Bank, of which about 35 billion KRW were improper loans. Ultimately, on the 27th, Im, a former head of a Woori Bank division who acted as an accomplice to Kim, was also arrested on charges of breach of trust and bribery under the Act on the Aggravated Punishment of Specific Economic Crimes.
Financial Services Commission Chairman Kim Byung-hwan and Financial Supervisory Service Chairman Lee Bok-hyun are attending the government-party meeting on measures to protect financially vulnerable groups and eradicate illegal private loans held at the National Assembly on the 11th. Photo by Kim Hyun-min kimhyun81@
Recently, attention has also been paid to loans received by another relative, Jang, of former Chairman Sohn at other Woori Financial affiliates such as Woori Savings Bank, Woori Financial Capital, Woori Card, and Woori Investment & Securities. Jang borrowed 700 million KRW from Woori Savings Bank, 1.2 billion KRW from Woori Financial Capital, 200 million KRW from Woori Card, and 300 million KRW from Woori Investment & Securities (formerly Woori Comprehensive Financial). The entire amount borrowed from Woori Investment & Securities has been fully repaid.
In this regular inspection, the FSS is expected to carefully examine the impact of accumulated financial accidents on financial soundness. This is because a weak internal control system and inadequate follow-up measures could cause temporary financial shocks. Woori Bank is required to reflect losses from financial accidents in its books according to supervisory regulations. The FSS has already notified Woori Financial Group of the results of two on-site inspections. An FSS official explained, "We plan to thoroughly review the overall risk management, including financial soundness and operational risks, of Woori Financial Group and the bank."
Meanwhile, Woori Financial’s third-quarter performance is expected to be relatively weak. Net income, which was 899.3 billion KRW in the third quarter of last year, is forecasted to fall to about 850.6 billion KRW (based on consensus), a decrease of more than 5% year-on-year this year. Operating profit is estimated to decline by more than 4% from 1.2182 trillion KRW to 1.1656 trillion KRW. This is a relatively poor performance compared to Shinhan Financial’s third-quarter net income forecast, which is expected to increase by about 13% year-on-year, KB Financial by about 9%, and Hana Financial by about 7%.
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