Dongyang and ABL Life Insurance Subsidiary Integration Application: Separate Issue from Unjust Loans
The Financial Supervisory Service (FSS) intends to implement a ‘two-track’ strategy in dealing with Woori Financial Group, differentiating between management evaluation and penalties related to unjust loans. This approach aims to prioritize the application for the integration of Dongyang and ABL Life Insurance as subsidiaries submitted by Woori Financial to the Financial Services Commission (FSC).
On February 3, during a briefing at the FSS headquarters in Yeouido, Seoul, Park Choong-hyun, Deputy Governor of the FSS, mentioned, “We received a request for a review from the FSC regarding Woori Financial’s integration of Dongyang and ABL Life Insurance. Given the urgency of the insurance company acquisition, we plan to handle the issue by separating the penalties from the unjust loans, releasing management evaluation results first based on the inspection outcomes.”
He further emphasized that the final decision on the integration of subsidiaries is under the jurisdiction of the FSC, and that the FSS’s role is limited to its responsibilities.
The FSS reported on February 4 that the inspection of financial holding companies and banks for the year 2024 revealed an additional 38 billion won in unjust loans involving multiple executives and employees, beyond the already identified suspicious loan of 35 billion won connected to relatives of former Woori Financial Chairman Sohn Tae-seung.
Deputy Governor Park expressed concerns over inadequate internal controls of Woori Financial, noting an increase in the scale of unjust loans from the previous year. He attributed the increase in unjust loan amounts to the expanded scope of inspections, moving beyond focusing only on relatives during preliminary inspections to a broader range during regular inspections.
He noted that a significant portion of the unjust loan amount had already been classified as bad debt by Woori Bank, indicating that the loans had been in arrears for over a month with limited collateral value, resulting in substantial losses.
Almost half of the total unjust loans by Woori Financial, amounting to 33.8 billion won, have been classified as non-performing. Among 45.1 billion won of unjust loans processed since the current management took office, 12.3 billion won has turned non-performing.
Park highlighted that a large portion (84.6%) of the 35 billion won previously identified as unjust loans has become non-performing and expressed concern that an additional 32.8 billion won of loans classified as normal could potentially also deteriorate, pointing out ineffective internal controls at the financial group level during the period of unjust loan issuance.
Regarding the responsibility of Lim Jong-ryong, Chairman of Woori Financial, Park subtly criticized by indicating that despite the current management being in office for over a year, these issues persist, suggesting a need for reflection on the situation.
When asked about the possibility of the announcement of penalties against Woori Financial being delayed past the term of Lee Bok-hyun, Governor of the FSS, Park replied that while efforts are being made to expedite management evaluation results, legal issues or disputes may cause indeterminacy regarding the timeline for penalty outcomes.
Finally, Park stated that separating management evaluation and penalties is common practice, reiterating that the current issue warrants independent handling.
Previously, on January 15, Woori Financial submitted an application to the FSC for the integration of Dongyang and ABL Life Insurance as subsidiaries. According to the Financial Company Governance Act, financial holding companies must undergo subsidiary integration review to become the largest shareholder of another financial company. According to the Financial Holding Company Supervision Regulations, Woori Financial must receive a comprehensive evaluation rating of grade 2 or higher to integrate Dongyang and ABL Life Insurance as subsidiaries.