'Breach of Duty Incident' NH Financial Group and Bank to Undergo Financial Supervisory Service Inspection

NH Investment & Securities Regular Inspection Moved Up
Comprehensive Inspections of Holding Companies, Banks, and Securities Firms
Thorough Review of Internal Controls and Governance Expected

[Image source=Yonhap News]

NH Nonghyup Bank, which experienced a financial misconduct involving breach of trust amounting to 11 billion KRW, along with NH Nonghyup Financial Group and NH Investment & Securities, will undergo inspections by the Financial Supervisory Service (FSS). Following the financial incident, the FSS, which had initially considered an on-site inspection of the bank, decided to conduct a comprehensive review of the holding company and its affiliates.

According to financial authorities on the 7th, the FSS began a special inspection of Nonghyup Financial Group and Nonghyup Bank from that day, and will start a regular inspection of NH Investment & Securities from the 8th. The regular inspection of NH Investment & Securities is being conducted ahead of the original schedule.

The FSS plans to extensively examine the internal control systems and governance issues of Nonghyup Financial Group and Nonghyup Bank through the special inspection. Nonghyup Bank disclosed on its website on the 5th that a financial misconduct involving breach of trust amounting to 10.947 billion KRW occurred from March 2019 to November last year.

During this process, it is expected that the FSS will also investigate whether the holding company fulfilled its appropriate role. Additionally, the inspection will likely cover whether the brand usage fees paid by the holding company and the bank to the Central Association, including contribution funds, are excessive. An FSS official explained, "We plan to look into and assess whether there are overall issues with internal controls or organizational culture."

Furthermore, the FSS has advanced the regular inspection of NH Investment & Securities. Since CEO Jung Young-chae’s term expires in March, the FSS intends to closely examine the successor appointment process. On the 5th, NH Investment & Securities confirmed candidates through the Executive Nomination Committee, including Yoon Byung-woon, Vice President of NH Investment & Securities; Yoo Chan-hyung, former Vice Chairman of Nonghyup Central Association; and Sa Jae-hoon, former Vice President of Samsung Securities.

NH Investment & Securities will hold an additional nomination committee meeting on the 11th to narrow down the CEO candidates and announce the final candidate through the regular board meeting. The FSS also plans to review risk management practices related to overseas real estate, including real estate project financing (PF), which is a key supervisory focus this year.

Meanwhile, by mid-March, the FSS plans to receive a 'Model Practice Roadmap on Bank Governance' from eight financial holding companies: KB, Shinhan, Hana, Woori, NH Nonghyup, BNK, DGB, and JB. This is a follow-up measure after the announcement of model practices at the end of last year, which included CEO appointment and management succession procedures, and strengthening the independence of boards and outside directors.

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