[Exclusive] Financial Supervisory Service Will Not Extend Woori Bank Embezzlement Inspection... Sanctions Expected by Year-End at the Earliest

Financial Supervisory Service Plans to End Inspection by Month-End
Key Issue: Extent of Accountability
Sanction Severity May Delay into Next Year
Attention on Director Lee Bok-hyun, Former Prosecutor's Intentions

[Asia Economy Reporter Song Seung-seop] The Financial Supervisory Service (FSS) has decided not to extend the inspection of the 60 billion KRW embezzlement case ongoing at Woori Bank. After several extensions, the on-site inspection, which has been conducted for nearly two months, is entering its final stages. The decision on sanctions against Woori Bank and the details are expected to be announced as early as the end of the year.

According to a comprehensive report from our coverage on the 21st, the FSS has settled on ending the special inspection of Woori Bank this month. This special inspection began on April 28 following the revelation of a 61.4 billion KRW embezzlement incident at Woori Bank that occurred between 2012 and 2018. Initially planned to last one week, the inspection schedule was extended four times, now set to conclude by the 30th. In terms of duration, the intensity is almost equivalent to a comprehensive audit.

The FSS extended the inspection as the embezzlement period was long and additional embezzlement facts were uncovered. An FSS official explained, "Since this is a past incident, not all necessary documents were fully preserved, and it took a long time to locate them," adding, "We plan to end the inspection by the end of this month without further extensions."

Once the inspection concludes at the end of this month, the sanction results are expected to be released no earlier than the end of the year. After the inspection, the FSS undergoes internal processing procedures. This includes drafting the inspection report, departmental review, sanction review bureau examination and coordination, prior notification, and sanction review committee deliberation, which can take from one month at the shortest to five months at the longest. If the FSS deems the matter requires Financial Services Commission approval, an additional month is needed for agenda submission and related processes.

Former Prosecutor FSS Chief: How Far Will Responsibility for the Embezzlement Incident Be Held?

The key issue is how far responsibility for the embezzlement incident will be assigned. Including currently serving executives in the sanctions could escalate the matter. If the CEO faces severe disciplinary action making reappointment difficult, the sanction review process may be prolonged, likely pushing the notification of results into the next year. An FSS official also stated, "The timing of sanction confirmation will vary depending on the severity."

The sanctions related to Lime Fund and Derivative Linked Fund (DLF) cases are representative examples. When the FSS announced severe disciplinary actions to bank presidents responsible for mis-selling, the subsequent sanction review meetings involved intense debates lasting until late at night. Despite holding multiple sanction review sessions, conclusions were sometimes not reached. For example, the sanction review for Hana Bank began on July 15 last year and only concluded on January 29 this year.

Attention should also be paid to the stance of Lee Bok-hyun, the new FSS chief and former prosecutor. Since the mis-selling incidents, the FSS has maintained the view that "the CEO is ultimately responsible for internal controls." In related trials, the FSS has argued that if internal controls were not properly established and operated, sanctioning the CEO is lawful. Since members of the sanction review committee cannot be free from the influence of the FSS chief, it is expected that Lee Bok-hyun’s intentions will be significantly reflected.

This content was produced with the assistance of AI translation services.