“Current management of Woori Financial Group became aware of the involvement of Son Tae-seung’s relatives no later than March last year,” indicating the possibility of sanctions or penalties against Woori Financial Group Chairman Lim Jong-ryong and Woori Bank CEO Cho Byung-kyu, by the Financial Supervisory Service. The Financial Supervisory Service revealed today (25th) that despite the current management of the bank and holding company being aware of the loans provided to Son Tae-seung’s relatives at Woori Bank for several years, they did not report the financial accident to the financial authorities, having acknowledged it as early as September to October last year and March this year.
Previously, the Financial Supervisory Service publicly disclosed the results of an ad-hoc inspection on improper loans at Woori Bank on the 9th of last month, to which Woori Bank issued press releases on the 11th and 13th, stating that there was no ‘delayed reporting’ or ‘failure to report’ to the financial authorities. According to the Financial Supervisory Service, Woori Bank claimed that they were not required to report to the Financial Supervisory Service as there was no illegal activity and that they did not request an investigation due to negligence in the loan screening process. However, the Financial Supervisory Service refuted these claims today, pointing out that Woori Bank should have reported the financial accident by April of this year at the latest, and it could even be deemed as an obligation that arose as early as the fourth quarter of last year.
The Financial Supervisory Service also stated that Woori Bank was aware of a significant number of improper loans and defaults as early as the fourth quarter of last year, before conducting their internal audit in January this year. If they were aware of wrongdoing during that time, there could have been an obligation to report the financial accident and disclose it since the last quarter of last year.
However, Woori Bank only reported the improper loan incident related to Son Tae-seung to the Financial Supervisory Service and disclosed it on their website on the 23rd of this month, which was criticized by the Financial Supervisory Service. Additionally, the Financial Supervisory Service criticized Woori Bank for laxity in their internal audit process related to the recent incident.
According to the Financial Supervisory Service, Woori Bank’s specific lending handled by a particular branch manager since July last year was repeatedly notified as a target for inspection due to being an underperforming loan. However, even after realizing that the loan was related to Son Tae-seung’s relatives around September to October, the bank did not report to the supervisory authorities or start an internal audit. It was only in January, after the problematic branch manager retired in December last year, that they began their internal audit.
The Financial Supervisory Service emphasized that even after the internal audit was concluded in March following the commencement in January, and after internal disciplinary actions such as dismissal were taken in April, Woori Bank did not inform the Financial Supervisory Service of the audit results. Only after the Financial Supervisory Service requested confirmation of the facts based on reports did Woori Bank provide the results of their internal audit.
The current management of Woori Bank and Woori Financial Group also had contradictory claims regarding when they first became aware of the situation, as stated by the Financial Supervisory Service. The Financial Supervisory Service explicitly mentioned that the credit department reported the loan to Son’s former chairman’s relatives between September and October last year to the current bank management. It was also pointed out that the current management of Woori Financial Group became aware of this fact no later than March of this year. Even though the current bank and holding company management were informed of the situation during the personnel meeting reflecting the internal audit results, they were criticized by the Financial Supervisory Service for not properly reporting to the board of directors.
The Financial Supervisory Service expressed concern that efforts to improve the governance structure jointly promoted by it and the banking sector, such as regular meetings with external directors and the publication of best governance practices in December last year, have been seriously undermined by Woori Financial Group and Woori Bank failing to properly report the significant improper loan transactions this time.
The Financial Supervisory Service regards the overall failure of internal control due to the mishandling of the large improper loans not only as a financial accident but also as a serious issue in the aftermath procedures such as failure to report the financial accident. The Financial Supervisory Service stated that they will thoroughly investigate the process of recognizing and dealing with improper loans at Woori Bank and the holding company, clarify any additional facts and will take the most stringent measures in accordance with the relevant laws and procedures against employees responsible for the mismanagement. They also emphasized that they will carefully examine the weaknesses in internal control revealed during this financial accident process, the malfunctioning of the governance structure oversight function, and actively monitor and supervise the prompt improvement and strengthening of the inadequate areas.