Savings Bank Document Forgery... 1.2 Trillion Won Unfair Business Mortgage Loans Detected

From 2019 to 2021, when real estate prices soared,
5 savings banks manipulated documents after household loan regulations tightened
and were caught by the Financial Supervisory Service for unfairly handling business mortgage loans

[Asia Economy Reporter Sim Nayoung] When household loan regulations were tightened during the period of rapidly rising real estate prices from 2019 to 2021, five savings banks were caught by the Financial Supervisory Service (FSS) for improperly handling business mortgage loans by falsifying documents.

On the 11th, the FSS announced that after conducting a focused inspection on the handling status of business mortgage loans at 79 savings banks from June to December last year, it identified improper handling cases amounting to a total of 1.2 trillion KRW at five savings banks. Based on outstanding balances, the amount is about 900 billion KRW. This accounts for approximately 0.8% of the total loans of savings banks (116.3 trillion KRW) and about 6.6% of the total business mortgage loans (13.7 trillion KRW).

The main type of improper handling involved loan solicitors using their own funds to first repay existing household mortgage loans, then obtaining business loans from savings banks to repay the solicitors’ funds, while the solicitors forged and altered documents to prove the loan usage.

In one actual case, an office worker took out a 400 million KRW household loan from a bank to purchase an apartment, and when additional funds were needed, registered as an e-commerce business operator. Then, through a loan solicitation corporation, the office worker applied for an 800 million KRW business loan. When the savings bank notified the office worker that the senior household loan had to be repaid first, the loan solicitation corporation temporarily repaid the office worker’s senior household loan. Afterwards, the office worker executed the 800 million KRW business loan.

On the day the loan was executed, the office worker transferred 400 million KRW for the household loan repayment and a processing fee to the loan solicitation corporation. The loan solicitation corporation forged supporting documents to make it appear as if the office worker had purchased 800 million KRW worth of goods necessary for the business and submitted them to the savings bank. The savings bank confirmed the loan purpose without verifying the actual details.

The FSS stated, "So far, the impact on the soundness of savings banks is limited," but recognizing vulnerabilities in the handling and post-management of business mortgage loans by savings banks, it has initiated institutional improvements. These include improving credit screening for individual business loans at savings banks, strengthening management of loan solicitors, and enhancing post-inspection procedures such as checking for misuse of funds.

Additionally, sanctions procedures will be taken against illegal and improper acts by savings banks, and loan solicitors involved in the fraudulent loan activities will be reported to investigative authorities on suspicion of forgery and alteration of private documents.

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