Financial Sector National Audit Begins on the 10th... Banks with Internal Control Issues 'On Edge'

Im Jong-ryong, Chairman of Woori Financial Group, Selected as Witness for Political Affairs Committee Audit
"I Do Not Intend to Avoid Attendance... Will Respond Sincerely"

Starting from the 10th, the National Assembly's Political Affairs Committee will begin its audit of the financial sector, causing tension among financial holding companies and banks that have previously faced issues with 'internal control' deficiencies. At Woori Financial Group and Woori Bank, which suffered from the scandal involving improper loans to relatives of former Chairman Son Tae-seung, Chairman Lim Jong-ryong is set to appear as a witness. Similarly, at NH Nonghyup Bank, which has experienced a series of financial accidents, President Lee Seok-yong has been selected as a witness and is preparing to attend the audit session.

The prosecution conducted a search and seizure at the Woori Bank headquarters in Jung-gu, Seoul, on the 27th in connection with former Woori Financial Group Chairman Sohn Tae-seung's relative's improper loan amounting to approximately 35 billion won. Photo by Kang Jin-hyung aymsdream@

According to the financial sector on the 7th, the National Assembly's Political Affairs Committee will officially start the audit of institutions under the Financial Services Commission beginning on the 10th, starting with the Financial Services Commission, Korea Development Bank, and Industrial Bank of Korea. On the 14th and 15th, the audit will cover the Deposit Insurance Corporation, Korea Asset Management Corporation, Korea Housing Finance Corporation, and Korea Credit Guarantee Fund. On the 17th, the Financial Supervisory Service and the Korea Inclusive Finance Agency will be audited.

The biggest point of interest in the early stages of the audit is whether the CEOs of financial institutions, who have been selected as witnesses, will attend. In the banking sector, Chairman Lim is summoned as a witness due to the improper loan scandal involving former Chairman Son’s relatives at Woori Bank, and President Lee has been summoned due to a series of financial accidents at NH Nonghyup Bank.

In the case of Chairman Lim, it is difficult to consider him directly responsible for the former Chairman Son’s scandal. However, improper loans continued during his tenure, and even after Woori Financial Group became aware of the situation, it delayed reporting to the supervisory authorities by about four months, revealing several problems in the aftermath management process. Earlier, Lee Bok-hyun, Governor of the Financial Supervisory Service, also pressured by saying, "Even though it has been well over a year under the new holding company chairman and bank president system, the way of handling the situation repeats past bad practices," and added, "Someone must take responsibility."

If Chairman Lim’s attendance is confirmed, it will be the first time a financial holding company CEO appears at a National Assembly audit. Although there have been several demands for financial holding company chairmen to attend in the past, most either did not attend or were excluded during discussions between the ruling and opposition parties. Chairman Lim is expected to face intensive questioning regarding the full details of the improper loan scandal and the delay in reporting.

It is also reported that Chairman Lim himself is willing to attend the audit session. A Woori Financial Group official stated, "In a previous statement, he said, ‘Once the investigation and prosecution results come out, I will humbly follow the appropriate measures and procedures,’ so it is understood that he does not intend to avoid attending the audit session," adding, "He will respond sincerely to the questions."

President Lee is also expected to face questions related to the series of financial accidents. NH Nonghyup Bank has suffered four financial accidents just this year alone. Among these are significant incidents such as an improper loan of 10.9 billion KRW through a false sales contract and an embezzlement case involving 11.7 billion KRW by an employee.

Meanwhile, although not part of the Political Affairs Committee, KB Financial Group Chairman Yang Jong-hee has been selected as a witness for the Ministry of Employment and Labor’s audit by the National Assembly’s Environment and Labor Committee. Kang Ho-dong, Chairman of Nonghyup Federation, and Lee Seok-jun, Chairman of NH Nonghyup Financial Group, will appear as institutional witnesses at the National Assembly’s Agriculture, Forestry, Livestock, Food, and Fisheries Committee audit.