The Financial Supervisory Service is to reprimand Shinhan Bank for irregular business activities at a meeting of the Sanction Review Committee on Thursday, officials said.

The regulator is considering issuing a warning to the commercial bank, and will confirm or revise the sanction level during the meeting.

If Shinhan Bank receives a warning, it will mark two warnings in less than a year ― an unprecedented case in the financial market. The bank received a warning for violating laws on real name financial transactions in early November.

The irregularities include negligent loan screening practices and careless management of customers’ deposits, according to FSS officials.

The officials said the bank’s irregularities are closely concerned with mismanagement by Shinhan Financial Group’s former top three executives including ex-chairman Ra Eung-chan.

Following an intensive probe on the nation’s third-largest financial group in the wake of embezzlement scandal involving the three former executives in late 2010, regulatory inspectors conducted another inquiry into the bank for some employees’ wrongdoings in the second quarter of 2011.

The recent inspection focused on a Dongah Construction manager’s embezzlement of company funds totaling about 89 billion won ($82 million), which had been entrusted to Shinhan Bank, an FSS official said.

As well as the pending sanction for the bank, the FSS plans to take disciplinary measures against dozens of incumbent executives and employees.

At least one of the former three top executives ― Ra Eung-chan, Shin Sang-hoon and Lee Baek-soon ― may also be included on the sanction list despite their departure from the bank, according to FSS officials

Meanwhile, regulatory inspectors conducted an on-the-spot probe last month at Shinhan Bank headquarters over its allegedly irregular lending practices.

A number of individual customers of the bank were pressured to purchase insurance products or to apply for credit cards, according to industry sources.

A financial company receiving three warnings from the FSS within three years could be subject to business suspension under regulatory rules.

By Kim Yon-se
(kys@heraldcorp.com)