[Exclusive] Lowest Recovery Rate at 'Sijung' Nonghyup Bank and 'Jibang' Gyeongnam Bank... "Recovery in Progress"

[Superficial Internal Controls] ③
A Review of Banks' Financial Accident Recovery Rates Over Five Years
NongHyup Bank Records Lowest Recovery Rate Among Major Banks at 1.7%
Gyeongnam Bank at 0.5%... "Most Will Be Recovered After Lawsuits"

Amid insufficient loss recovery measures for financial accidents in the banking sector, NongHyup Bank and Gyeongnam Bank have been identified as having the lowest recovery rates. However, in the case of Gyeongnam Bank, most of the employee embezzlement incidents occurred in 2023, and it is expected that the majority of the losses will be recovered after the conclusion of the lawsuits.

According to the '2020-2024 Financial Accident Status by Bank' submitted by the Financial Supervisory Service to the office of Kim Jae-seop, a member of the National Assembly's Political Affairs Committee from the People Power Party, NongHyup Bank had the lowest recovery rate among commercial banks at 1.7%. Over the past five years, financial accidents amounting to 52.68 billion KRW occurred, of which only 911 million KRW was recovered.

The low recovery rate at NongHyup Bank is due to the largest financial accident occurring most recently last year. NongHyup Bank experienced financial accidents totaling 45.387 billion KRW last year, accounting for 86% of the total. The amount recovered so far is 461 million KRW, representing only 0.5%.

Last year, a total of 16 financial accidents occurred at NongHyup Bank. In February, there was an unfair loan incident involving 10.9 billion KRW using false sales contracts. In August, an employee at a Seoul branch embezzled approximately 11.7 billion KRW over nearly three years by using acquaintances' names to secure large loans.

Among commercial banks, KB Kookmin Bank and Woori Bank also had low recovery rates of 2.1% and 5%, respectively.

KB Kookmin Bank's low recovery rate of 1.8% last year was influenced by the large scale of financial accident losses amounting to 69.423 billion KRW. A KB Kookmin Bank official explained, "There were many financial accidents last year caused by employees aggressively trying to meet performance targets, resulting in excessive loans. From the customer's perspective, it is unfair and they have no obligation to repay, making quick recovery difficult."

Woori Bank's low recovery rate appears to be due to the aftermath of a 60 billion KRW embezzlement incident in 2022. The bank discovered late that an employee conspired with his younger brother to embezzle about 61.4 billion KRW over six years, and recovery efforts were hindered as no valuable assets were found during the seizure. The employee reportedly lost all the embezzled money through investments and other means.

Among all 15 banks, the lowest recovery rate was at the regional bank Gyeongnam Bank, at 0.5%. Out of a total of 60.158 billion KRW, only 279 million KRW has been recovered so far. Although Gyeongnam Bank had no financial accidents last year, the average recovery rate was dragged down by recovering only 200 million KRW from a 60 billion KRW loss in 2023.

The majority of the loss was caused by a single employee in the investment banking department who embezzled a total of 308.9 billion KRW over 13 years through a Ponzi scheme, resulting in a loss of 59.5 billion KRW. The employee forged withdrawal slips under the names of project companies or manipulated loan request documents at 17 project financing (PF) sites he managed to divert loan principal and interest repayments and loan funds.

However, Gyeongnam Bank stated that recovery efforts are currently underway and that most of the losses will be recovered once the case is closed. A Gyeongnam Bank official said, "We have already recovered 26.1 billion KRW in principal and interest, so the actual loss to the bank is 33.4 billion KRW. Since there are seized items by the prosecution and real estate holdings, recovery will be possible immediately after the final judgment. We are currently waiting." The bank estimates that the seized items by the prosecution are worth 13.4 billion KRW (including gold bars and cash), and the recoverable amount from real estate holdings is 13 billion KRW, projecting a total recovery rate of over 88%.