Woori Financial Group’s former Chairman Sohn Tae-Seung (Courtesy of Woori)
South Korea’s financial watchdog said on Sunday it has found that Woori Financial Group, the fourth-largest financial holdings group in the country, had lent a combined 35 billion won ($25.6 million) improperly to former Chairman Sohn Tae-Seung’s relatives and companies they are involved with.
The Financial Supervisory Service (FSS) said that from April 3, 2020 to January 16 this year, Woori Bank’s employees executed 42 loans totaling 61.6 billion won for Sohn’s relatives and businesses they are related to.
The lending includes 45.4 billion won in 23 loans for companies, where former and current chief executives and key shareholders are Sohn’s relatives.
The remaining 16.2 billion won was transacted for 19 loans of nine borrowers, who are not Sohn’s relatives but suspected to have helped his relatives use the money, the FSS said.
Among the total of 61.6 billion won, 35 billion won in 28 loans was found to have been improperly made without following standards and procedures during the lending screening and follow-up processes, the financial watchdog added.
The improper cases include the bank having executed a loan without strict verification of a borrower’s documents, suspected to be false, and a loan with collateral with little value or guarantors with no ability to repay debts.
Another case was that the bank violated lending screening and follow-up procedures, completing the processes at a branch without the headquarters’ final approval.
The bank has also failed to check supporting documents promptly for detection of misappropriation, the FSS said.
Of the total lending, some 26.9 billion won in 19 loans were found defaulted or in arrears as of July 19, the financial regulator added.
Sohn became the bank’s chief in 2017 and served as both the holding group’s chairman and the bank’s head between January 2019 and February 2020. He stepped down from the group chair in March 2023 as the term ended.
Before he took the realm, his relatives and their companies had taken 450 million won in loans.
The financial watchdog said it takes Woori Financial’s improper lending seriously and recognizes that the internal control of the holding group and the bank didn’t work properly under the current system, where the authority is concentrated on the chairman.
The FSS added it will strictly proceed with the sanctioning process based on a legal review of whether there were violations and conflicts of interest in handling loans and will notify the investigative agencies of document forgery and fraud by the borrowers.
By Hyun-Woo Kang and Jae-Won Park
hkang@hankyung.com
Jihyun Kim edited this article.
