Financial Supervisory Service Begins On-Site Inspection of NongHyup Cooperative

[Asia Economy Reporter Eunju Lee] The Financial Supervisory Service (FSS) has launched an on-site inspection of NongHyup (NongHyup Cooperative). This is interpreted as an effort to determine the eligibility of housing mortgage business loans, which have recently surged mainly in the secondary financial sector such as savings banks.

According to industry sources on the 22nd, the FSS is conducting investigations at NongHyup branches. According to the industry, the FSS is reportedly focusing on "business housing mortgage loans." To verify whether the funds from business loans were used appropriately, they are thoroughly reviewing related supporting documents. Under the Basic Terms and Conditions for Credit Transactions, borrowers who receive business housing mortgage loans must submit documents proving the use of the loan within three months, and it is understood that the FSS is examining the loan purposes through these documents.

Business housing mortgage loans are relatively lightly regulated and have recently been pointed out within the industry as a hotbed for "work loans." Earlier in June, the FSS mentioned that it is necessary to carefully monitor "work loans," which involve organized forgery of documents to obtain approval for "business loans" in the savings bank sector. The FSS warned, "Special caution is required to prevent illegal activities such as treating loans as business housing mortgage loans while knowing that the loan funds will not actually be used for business purposes." According to the FSS, housing mortgage business loans in the savings bank sector surged from 5.7 trillion won at the end of 2019 to 12.4 trillion won at the end of March 2022.

However, an FSS official stated, "When inspections are conducted, household loans, corporate loans, and business loans are all reviewed, and we do not focus exclusively on the specific theme of business loans," adding, "Also, we are not currently conducting inspections."

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