FSS says scrutiny includes banking unit’s lending to Lone Star


The Financial Supervisory Service is probing Hana Financial Group and Hana Bank over several key issues including their loans totaling 1.5 trillion won ($1.42 billion) to U.S.-based Lone Star Funds, officials said on Monday.

The other issues include possible irregularities or dubious practices in the nation’s fourth-largest financial group and its flagship banking unit, FSS officials said.

The nation’s top regulator plans to dispatch a group of inspectors to the Hana headquarters in downtown Seoul later this month, according to the officials.

“We’ve been looking into related documents (submitted by Hana’s internal auditors),” an FSS director general said, speaking on condition of anonymity.

Asked about the timing of the on-the-spot probe, he said, “We are considering it during the latter part of August.”

He stressed that the examination is not focused on overall management conditions of the financial group as usual, but on a particular business sector.

“Unlike past cases, this is not a regular probe,” he said. “We will carry out inquiries into their certain business parts, which could be regarded as a vulnerable point.”

While the official declined to specify the sector under intensive scrutiny, he said the loans issuance case between Hana Bank and Lone Star Funds in late June “is certainly included” in their scrutiny.

Under instruction of FSS Gov. Kwon Hyouk-se, who took office early this year, inspectors have adopted policies of refraining from conducting habitual or periodical probes, he added.

The director general’s remarks hint at the feasibility that regulators may take tough disciplinary action against Hana Financial and Hana Bank in the coming months.

Another official in charge of the Hana probe said it will take about three to four weeks to complete the on-the-spot inspection.

The FSS had reportedly delayed the formerly scheduled yearly probe into Hana Financial as many internal inspectors were dispatched to the distressed savings banking sector.

An industry source said it seems that the regulator shifted its Hana inspection focus.

“A noteworthy point is that Hana has not scrapped its move to acquire Korea Exchange Bank from Lone Star though financial authorities have continued to take a wait-and-see position.”

He predicted that the FSS might discover if there was any behind-the-scenes contract in issuing loans.

The loans were made to the U.S. fund after the preliminary deal between Hana Financial and Lone Star expired on May 24.

Hana Bank said on July 1 that the lending was collateralized by Lone Star’s KEB shares. And it also said later that the two parties extended the KEB takeover deal.

Hana Financial had raised a certain portion of the acquisition funds from its banking and securities units. It had also attracted some foreign investors.

An FSS spokesman said, “Should the FSS review documents after notifying a financial company of a schedule to conduct an on-the-spot probe, it means the company has already been under inquiry.”

He said it is merely a matter of location ― either the probe is underway in the FSS building or in the financial company.

By Kim Yon-se and Cynthia J. Kim
(kys@heralm.com) , (cynthiak@heraldcorp.com)