Lim Jong-ryong, Chairman of Woori Financial Group, "Apologize to Customers with Inappropriate Loans... Will Make a Radical Change"

[Image source=Yonhap News]

Im Jong-ryong, Chairman of Woori Financial Group, stated on the 12th regarding the improper loan incident involving relatives of Son Tae-seung, former Chairman of Woori Financial Group and Woori Bank, "We must take this as an opportunity for a complete transformation by thoroughly reviewing and rationally and objectively changing from top to bottom the corporate culture, work processing practices, hierarchical relationships, and internal control systems that we have taken for granted."

On the morning of the same day, Chairman Im held an emergency executive meeting at the headquarters in Jung-gu, Seoul, attended by all executives of the holding company and the bank, including Cho Byung-kyu, President of Woori Bank, and said, "We sincerely apologize to customers who have unwavering trust in Woori Financial."

He added, "The causes of this incident include improper orders, incorrect work processing practices, opportunistic behavior, and loopholes in the internal control system. These are unavoidable responsibilities of the management, including myself, who lead Woori Financial and Woori Bank. We must create a corporate culture where employees can firmly refuse unjust orders from superiors and where the organization thoroughly protects employees who perform their duties according to these principles."

Chairman Im also emphasized that they will cooperate fully with the investigation process, stating, "If there are doubts in the market, they must be clearly clarified." President Cho, who attended the meeting, also said, "As the bank president, I feel a heavy responsibility," and added, "We will firmly establish principled management through a 'one strike out' system based on a zero-tolerance policy for employees who do not comply with regulations and principles."

[Image source=Yonhap News]

According to the Financial Supervisory Service, Woori Bank executed loans totaling 61.6 billion KRW (42 cases) from April 2020 to January this year to borrowers related to relatives of former Chairman Son. This includes 23 cases where the relatives were registered as current or former representatives or major shareholders, or 19 cases involving corporations and individual businesses suspected of being the actual users of the loan funds, considering principal and interest repayments.

This period coincides with the time when former Chairman Son exercised control over the bank and the holding company. He was appointed as Woori Bank President at the end of 2017, served as the newly established Chairman of Woori Financial Group from 2019, and retired in March last year. Loans executed to borrowers related to these relatives before Son became President and Chairman amounted to about 450 million KRW (5 cases).

The financial authorities found that out of the total 61.6 billion KRW in loans, 35 billion KRW (28 cases) were handled improperly without following standard criteria and procedures during loan screening and post-management. Most of the problematic loans were reportedly handled under the leadership of Im, the former head of the Seolleung Financial Center, who was dismissed in April.

The methods varied. Loans were executed without separate verification despite borrowers submitting suspicious false documents, collateral was set on assets with no collateral value, and loans were handled based on guarantors without guarantee capacity. Additionally, some cases were arbitrarily processed at branch level without head office approval during loan screening and post-management.

Due to these improper loans, Woori Bank is facing losses amounting to hundreds of billions of KRW. As of the 19th of last month, authorities identified that 26.9 billion KRW (19 cases) of the total loans have triggered conditions for loss of interest benefits (EOD) or are currently delinquent. Woori Bank also anticipates losses ranging from 8.2 billion to 15.8 billion KRW.

Woori Bank has taken disciplinary actions such as dismissal against eight employees, including Im, who were involved in this incident, and on the 9th filed complaints with investigative authorities based on its own inspection results, accusing related persons of document forgery and breach of trust. However, the bank maintains that there is no confirmed involvement of former Chairman Son. A Woori Bank official stated, "Loans related to this continued even after (former Chairman Son) retired," adding, "The CEO has limited influence over loans at frontline branches."

Within the financial sector, many find this incident difficult to understand. Especially following a 70 billion KRW embezzlement by a corporate improvement department employee in 2022 and a 17 billion KRW embezzlement by a deputy-level employee this year, the occurrence of an incident related to the CEO has led to criticism that the bank’s internal control system has become virtually ineffective.

An official from a commercial bank commented, "This is an incident hard to believe happened under a commercial bank system; it is something that might occasionally occur in the secondary financial sector," and added, "Following improper orders is subject to disciplinary action, so it is hard to imagine that a single head of department and employees would risk disciplinary dismissal and continue such behavior for three years." The official also pointed out, "Although Woori Bank recognized the facts first and started an inspection, it is natural to conduct audits when delinquencies occur, but the post-processing was not smooth."

The Financial Supervisory Service is also focusing on this incident involving the CEO, who is the highest internal control officer. The FSS stated, "We take this matter seriously and severely as the current system concentrates authority in the holding company chairman, and internal controls of the holding company and bank did not function properly," adding, "We will strictly proceed with disciplinary procedures based on legal reviews regarding potential violations of financial laws and conflicts of interest in loan handling. Furthermore, document forgery and fraud charges related to false document submissions by borrowers and related persons found during the inspection will be reported to investigative authorities."

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