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NongHyup Bank sanctioned for incurring W55b loss

Lender accused of reckless investment as well as lax cyber security

Financial regulators revealed that NongHyup Bank had engaged in irregular investment practices and breached banking regulations, which led to heavy losses.

NongHyup Bank suffered losses of 55.1 billion won ($47.9 million) from reckless investment between 2007 and 2011, according to the Financial Supervisory Service on Thursday.

A dealer at the bank brought about losses totaling 21.8 billion won after he traded unauthorized financial derivatives 182 times over seven months in 2011.

A division of the bank incurred losses worth 33.3 billion won in its investment in an overseas real estate fund from July 2007 to May 2009.

In addition, as an irregular consumer financer, the lender was found to have overcharged 564 borrowers 1.6 billion won in loan interest.

The FSS said it issued an institutional caution to NongHyup and censured 28 employees. It also imposed fines of 25 million won.

According to market insiders, NongHyup Bank has also been negligent in other sectors such as consumer protection and cyber security.

In the yearly assessment from the regulator on financial firms’ consumer protection publicized in April, Nonghyup Bank ranked at the bottom out of the nation’s 15 commercial banks.

Nonghyup Bank was given the lowest grade of “class 5” for the second consecutive year. Its customers have sometimes faced inconveniences due to the lender’s network system glitches.

Concerning cyber transaction security, the nation’s chief financial regulator pledged to make a full-fledged investigation into NongHyup Bank and its parent company, NongHyup Financial Group.

In the local financial sector, Nonghyup posted the most frequent accidents, involving the paralysis of its Internet banking system, from hacker attacks over the past few years.

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