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Woori leads Korean banks in overseas sanctions in 2022

Local banks urged to shape up amid push for global expansion

Jan. 25, 2023 - 17:44 By Song Seung-hyun
Woori Bank logo (Woori Bank)

Woori Bank’s overseas subsidiaries received the most penalties last year among South Korea's top four commercial banks, according to DART, the Financial Supervisory Service's electronic disclosure board, on Wednesday.

In 2022, Woori Bank that operates 11 overseas branches received a total of six penalties -- two in China, two in Indonesia, one in Russia and one in India.

China's financial watchdog issued a warning and a fine of 200,000 yuan ($29,000) to Woori Bank China in April last year for errors in its international payment balance report and statistical report.

Woori Bank’s Beijing branch also was fined 900,000 yuan for insufficient reviews of personal business loans.

Bank Woori Saudara was the first to be penalized among Woori’s overseas subsidiaries last year. In January, it was fined 60 million rupiah ($4,000) by the Indonesian financial watchdog for an error in a regular report.

An additional fine of 4 million rupiah was imposed on Woori Bank in Indonesia for a delay in reporting information related to the capital increase.

In July of last year, Woori Bank Russia was fined 1 million rubles by the Central Bank of the Russian Federation for violating foreign exchange position trading rules.

Also, in September last year, the Indian arm of Woori Bank was fined 5.91 million rupees ($72,000) by the Reserve Bank of India for applying a lower interest rate than the notified rate for time deposits.

"Woori Bank’s wider network of global branches seems to have led to a higher number of penalties imposed,” an industry official said on condition of anonymity, adding that a bigger presence is subject to heightened regulatory scrutiny.

Woori’s crosstown rivals operate a smaller number of overseas branches -- Shihan with 10, Hana with 10, and KB Kookmin with six.

Aside from Woori, the overseas subsidiaries of Hana Bank and KB Kookmin Bank also got one penalty each last year, DART said.

The Ho Chi Minh branch of KB Kookmin Bank was fined 160 million dongs ($6,800) by the State Bank of Vietnam in May last year after it was discovered that the Korean bank did not check whether it got financial authorities’ approval before transferring abroad interests earned from offshore loans.

In September last year, Hana Bank China also was fined 15.76 million yuan by the state financial watchdog for insufficient foreign currency payment guarantees.

As local banks seek to expand their presence overseas -- especially due to the saturated Korean banking market -- industry insiders see that Korean commercial banks will have to shape up in order to avoid such penalties in the future.

There were 204 overseas branches of domestic banks as of the end of 2021, an increase of seven on-year, according to the FSS.

Among these overseas branches, 141 were in Asia, accounting for 69.1 percent of the total.

The net profit from local banks’ overseas branches in 2021 also surged to $1.1 billion from $446 million in 2020.

Local banks saw the most net profit increase in Cambodia ($290 million), followed by that of in Hong Kong ($214 million), and Vietnam ($172 million).

Woori Bank's best performing subsidiary is in Vietnam, where it saw a net profit of 41.3 billion won ($33.5 million). It also made a net profit of 44 billion won in Cambodia. This is an increase of 28 percent compared to the same period in 2021.

In Korea, Woori Bank saw a cumulative net profit of 214.4 billion won in the third quarter of last year.