NH Bank Faces Stricter Internal Controls as Regulators Take Action

The Financial Supervisory Service (FSS) has completed its regular inspection of NH NongHyup Financial Group and NH NongHyup Bank and has initiated sanction procedures.

The FSS is reviewing sanctions with a focus on internal control violations related to a series of financial incidents at NH NongHyup Bank, including illegal loans and embezzlement cases.

In May this year, the FSS conducted intensive inspections of NongHyup Financial Group and NongHyup Bank. During the process, it identified weak internal controls within the bank and excessive intervention in management and personnel decisions by the central cooperative.

As a result, NongHyup Bank is expected to face reprimand sanctions, with the outcome likely to be announced in early February next year.

An FSS official stated, "We plan to focus our investigation on whether NH NongHyup Bank has established an adequate internal control system regarding improper loans and violations of credit extension procedures."

Meanwhile, the sanction procedures will go through the Sanctions Review Committee and the Financial Services Commission's regular meetings before a final decision is made. This process is expected to take several months.

There is speculation that the ongoing regular inspection of Woori Financial Group may divert FSS resources, potentially causing additional delays in the sanction procedures for NongHyup Bank.

NongHyup Financial Group has also begun efforts to improve related systems in response to the FSS’s recommendations for improving group governance.

The FSS has advised NongHyup Financial Group to establish procedures for managing subsidiary operations and recording personnel adjustment committee activities, as well as forming an official consultative body with the central cooperative to enhance transparency.

In response, NongHyup Financial Group is preparing improvement measures for the pointed issues and plans to report the results to the FSS in the future.


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NH Bank Faces Stricter Internal Controls as Regulators Take Action