Woori Bank Loans 61.6 Billion KRW to Former Chairman's Relatives... Financial Supervisory Service Deems 35 Billion KRW Improper

Woori Bank has raised both the upper and lower limits of its 5-year fixed-rate mortgage loan interest rates by 0.11%, while Shinhan Bank plans to increase its mortgage loan interest rates by 0.05% starting from the 15th. The photo shows a Woori Bank branch in Seoul. Photo by Jinhyung Kang aymsdream@

Woori Bank has been found to have loaned approximately 61.6 billion KRW over the past four years to corporations and individual business owners related to Son Tae-seung, former chairman of Woori Financial Group, according to an inspection by the Financial Supervisory Service (FSS).

35 billion KRW of the 61.6 billion KRW were improper loans... 26.9 billion KRW are non-performing or overdue

The FSS announced on the 11th that, based on an on-site inspection of Woori Bank, from April 3, 2020, to January 16 of this year, a total of 42 loans amounting to 61.6 billion KRW were executed to relatives of former Woori Financial Group chairman Son and borrowers suspected to be the actual users of the funds. Among these, 35 billion KRW were improper loans that did not follow standard criteria and procedures, and 26.9 billion KRW were identified as either non-performing or overdue. The FSS plans to strictly proceed with disciplinary measures and notify investigative authorities regarding any illegal suspicions related to the borrowers and associated parties.

Son was appointed as the president of Woori Bank in 2017. When Woori Financial Group was re-established in January 2019, he concurrently held the positions of chairman of the holding company and president of the bank, was reappointed as chairman in March 2020, and completed his term in March last year. It was revealed that Woori Bank provided approximately 45.4 billion KRW in 23 loans to 11 borrowers, including corporations and individual business owners where Son’s relatives were registered as former or current representatives or major shareholders.

Additionally, considering facts such as principal and interest repayments made on behalf of others, it was confirmed that 19 loans amounting to approximately 16.2 billion KRW were extended to nine borrowers suspected to be the actual users of the loan funds among these relatives. The FSS stated that many of these loans were handled under the leadership of a regional headquarters chief, who has since been dismissed. Before Son exercised control over Woori Financial Group and the bank, loans to borrowers related to these relatives amounted to only five cases totaling 450 million KRW. After he gained control, the loan amount increased by about 137 times.

On-site inspection following tip-off... Improper loan screening and post-management

The on-site inspection was conducted following related tip-offs. Within the financial sector, there were circulating suspicions regarding these improper loans. The FSS revealed that among the loan cases, 28 loans amounting to 35 billion KRW were improperly processed without following standard loan screening and post-management procedures.

For example, loans were executed without separate verification despite borrowers submitting documents suspected to be false, collateral without value was accepted as security, or loans were granted based on guarantees from guarantors lacking sufficient creditworthiness.

Furthermore, cases were uncovered where loan screening and post-management processes violated procedures by being arbitrarily handled at branch level without head office approval. Also, during checks for misuse of loan purposes, supporting documents were not verified, resulting in failure to timely detect misuse.

The FSS also explained that as of the 19th of last month, among all loans related to Son’s relatives, 19 loans amounting to 26.9 billion KRW had incurred disadvantages such as loss of benefit of time or were overdue.

The FSS stated, "We recognize this case very seriously and strictly, as internal controls within the holding company and bank did not function properly under the current system where authority is concentrated in the holding company chairman." It added, "Based on legal reviews regarding potential violations of financial laws and conflicts of interest during loan processing, we will strictly proceed with disciplinary measures. Additionally, any forgery, fraud, or false document submissions by borrowers and related parties discovered during the inspection will be reported to investigative authorities."

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