FSS says most unlawful practices detected at large institutions


Major banks have been caught for misconduct such as failing to confirm real names in financial transactions or making borrowers purchase financial products to have their loan applications approved, the Financial Supervisory Service said Thursday.

The nation’s top financial regulator said it reprimanded numerous banks 53 times and punished 348 bank employees over the past two years.

The FSS issued institutional warnings to KB Kookmin Bank, Shinhan Bank, Hana Bank and HSBC Bank once each.

If a bank receives three or more institutional warnings in three years, it can be subject to more serious punishment such as partial suspension of operations or shutdown of branches.

The regulator issued cautions to Standard Chartered Bank Korea twice, as well as KB Kookmin, Industrial Bank of Korea and Busan Bank.

Violation of the law on real-name financial transactions was the most common malfeasance, with 18 cases found. Tying down borrowers to make deposits came second, with nine cases.

KB Kookmin was the most frequently censured bank (seven times), followed by Hana Bank, Korea Exchange Bank, Industrial Bank of Korea and Citibank Korea, which were sanctioned five times each.

KB Kookmin also marked the largest number of employees reprimanded ― 73 ― followed by 60 at Hana and 40 at KEB. Considering that Hana and KEB are affiliated, Hana Financial Group had the largest number of employees scolded among financial groups.

Industrial Bank of Korea and Citibank Korea saw 16 and 11 employees reprimanded, respectively.

Standard Chartered Bank Korea and Daegu Bank were upbraided four times each, Shinhan Bank, Woori Bank, Busan Bank, Jeju Bank three times each and Kwangju Bank twice.

Korea Development Bank, HSBC Bank, Kyongnam Bank and Jeonbuk Bank were censured once each.

“Since most of the unlawful practices were found in large banks, they should take steps to reform their operations,” a staff member of the Korea Finance Consumer Federation said.

Local branches of nine foreign banks were also slapped on the wrist over the past two and a half years.

They were Morgan Stanley, Royal Bank of Scotland, Deutsche Bank, Barclays Bank, Nova Scotia, Bank Mellat, Bank of China, United Overseas Bank and DBS Bank.

Three ― Morgan Stanley, RBS and DBS ― were admonished for unauthorized brokering or selling financial investment products, while RBS and Deutsche were caught for wrongful entrustment.

The FSS said it will conduct inspections on 14 branches of foreign banks this year, with a focus on unauthorized handling of financial products and unlawful entrustment.

By Kim So-hyun (sophie@heraldcorp.com)