Four banks under probe over unfair lending
July 6, 2011 - 21:20
The nation’s financial regulator is investigating four major commercial banks on suspicion of unauthorized lending, banking sources said Wednesday.
The four facing a probe are Kookmin, Woori, Shinhan and Hana, and the Financial Supervisory Service has recently completed its preliminary examination of the banks, the sources said.
The unauthorized lending practice refers to banks’ demand that borrowers apply for their insurance products -- also known as bancassurance -- in exchange for issuing loans.
According to the sources, the regulatory body is also poised to embark on on-the-spot inspections into the allegations as early as next week.
“The FSS has already collected basic documents through its preliminary probe over the past few weeks,” a source close to the matter told The Korea Herald.
Another source said, “As far as I’m concerned, the regulatory body is considering dispatching a group of inspectors to the headquarters of the four banks, starting next Monday.”
A senior official at the financial service improvement department of the FSS confirmed the preliminary inspection.
But he declined to comment on the timetable of dispatching inspectors to the banks’ headquarters for the scheduled full-scale probe.
“Due to a problem with the manpower needed to take on the on-the-spot inspections, it is not easy to dispatch inspectors to the banks simultaneously,” he said.
He said there was a possibility that the four lenders will be subject to a full-scale probe “in turn,” even though the FSS has recently increased the number of inspectors.
The financial service improvement department was set up several months ago under FSS Governor Kwon Hyouk-se’s commitment to securing consumer rights by boosting manpower for inspection.
Over the past few years, a legal loophole involving the practice meant it was difficult for the regulator to take punitive action against rule-violators.
The National Assembly has been reviewing a revised bill on sanctions against banking law violators.
Lawmakers have been in talks on whether to pass the bill through the National Assembly, which has already received approval from the Legislation and Judiciary Committee.
Aside from the insurance products, several banks have reportedly urged some borrowers to apply for funds or open installment savings bank accounts.
Most of the customers complaining about the practices were individuals or small- and mid-sized enterprises.
The bill would ban the habitual lending practices and dictate that rule-violators are given penalties.
In addition, FSS officials, in coordination with the Financial Services Commission, are mapping out administrative punitive measures to issue against rule-violators.
By Cynthia J. Kim