Over the past five years, more than 2.3 trillion KRW in illegal loans have been discovered at Woori Bank, as revealed by the Financial Supervisory Service (FSS) investigation.
In particular, it was found that the illegal loans involving Sohn Tae-seung, the former chairman of Woori Financial Group, and his relatives amounted to 730 billion KRW.
Woori Financial Group and Woori Bank are shown to have been negligent in internal controls by significantly easing the disciplinary standards for loan-related staff.
On February 4, the FSS presented the results of its regular inspection of Woori Financial and Woori Bank at the '2024 Financial Holding and Bank Inspection Results Briefing,' pointing out these issues.
FSS Chairman Lee Bok-hyun stated, "With large-scale financial accidents continuing to occur, the ethics and internal control capabilities of financial companies are being questioned. Such inadequate internal controls are not just a problem for specific financial companies, but a structural issue across the financial sector."
According to the FSS investigation, Woori Bank issued 101 cases of illegal loans worth a total of 2.334 trillion KRW last year alone. Of this, 730 billion KRW was related to Sohn’s relatives, 380 billion KRW more than the previously reported 350 billion KRW.
Notably, more illegal loans were issued during the tenure of current chairman Im Jong-ryong (451 billion KRW) compared to Sohn’s term (279 billion KRW). Of the illegal loans involving Sohn’s relatives, 338 billion KRW are classified as bad loans.
In addition to Sohn's relatives, former and current senior executives were involved in illegal loans totaling 730 billion KRW.
A prominent example involves a vice president of Woori Bank, who introduced a loan broker from the same church to a bank employee. The employee approved an illegal loan worth 18 billion KRW and personally received 38 million KRW into their account.
Moreover, 27 current and former employees of Woori Bank are found to have carelessly handled loan assessments, issuing excessive short-term performance-driven loans. This led to a total of 1.604 trillion KRW in illegal loans, of which 1.229 trillion KRW (76.6%) has become non-performing loans.
Woori Bank was aware of the illegal loans involving Sohn’s relatives but failed to report them to financial authorities for nearly five months. The internal whistleblower system also failed to function, which has led to similar cases occurring in other financial institutions.
Violations were also found in the process of Woori Financial’s acquisition of Dongyang Life and ABL Life. Despite Woori Financial's internal regulations requiring prior review by the risk management committee, Chairman Im Jong-ryong bypassed this and discussed the acquisition at the board meeting first.
Even on the day the stock purchase agreement was signed, the risk management committee and the board were held just 20 minutes apart, and the committee’s review results were not properly reflected in the board’s discussions.
Furthermore, Woori Financial included a clause in the acquisition contract stating that the deposit would not be refunded if the acquisition was rejected by financial authorities, but this was not officially discussed at the board meeting.
Woori Financial also prepaid 1.55 trillion KRW in contract deposits for agreements with China’s Multinational Insurance.
Another controversy surrounds Woori Bank’s 3.5 trillion KRW loan to its affiliate, Woori Financial F&I. This loan was secured by subordinated bonds from a special purpose company (SPC) controlled by Woori Financial F&I, which raises concerns that Woori Bank effectively supported a high-risk project indirectly.
The FSS believes this structure is likely a loophole to avoid the Financial Holding Company Act and has requested an official interpretation from the Financial Services Commission (FSC) on whether this constitutes a legal violation.
Additionally, the investigation revealed that a derivative product dealer at Woori Bank had concealed a 1 billion KRW loss from an equity-linked security (ELS) caused by a sharp drop in the Hong Kong H Index. The FSS has confirmed signs of manipulation and is considering follow-up measures.
Based on these inspection results, the FSS will initiate sanction procedures against Woori Bank and Woori Financial Group.
FSS Deputy Governor Park Chung-hyun explained, "We are reviewing the items subject to sanctions and performance evaluation. It will take some time as legal advice and interpretations from the Financial Services Commission are necessary."
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Woori Bank’s 2.3 Trillion KRW Illegal Loan Scandal Involving Executives and Relatives
Over the past five years, more than 2.3 trillion KRW in illegal loans have been discovered at Woori Bank, as revealed by the Financial Supervisory Service (FSS
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