FSS to probe banks’ insurance sales

Regulators to punish lenders for irregular loan issuance in May


Commercial banks will soon face a strict regulatory crackdown for possibly irregular practices in sales of “bancassurance” products, officials said.

The Financial Supervisory Service plans to dispatch a group of inspectors to the headquarters of major banks such as Kookmin, Woori and Hana, starting in the coming weeks.

In the same vein, several insurance companies, including Samsung Life and Korea Life, could be the target of close monitoring as to whether they sought unauthorized business activities in coordination with banks.

While the regulator has pledged a full-fledged investigation under FSS Gov. Kwon Hyouk-se’s initiative to protect the consumers’ rights, the probe is likely to continue until the third quarter of this year.

Top regulator Kwon commented on “rampant irregular practices in the insurance and bancassurance sector” during his interview with The Korea Herald last February.

An FSS official said their possible irregularities include hiring employees ineligible for sales of insurance policies and failing to inform consumers of details on insurance product terms.

The coming probe in the insurance and bancassurance business comes after the FSS’ year-long investigation into banks’ irregular lending practices.

The regulator’s full-fledged probe has been focused on the allegation that banks urged many individuals and corporate customers to purchase insurance products or investment funds in exchange for issuing loans.

Since he took office as chief of the FSS in March 2011, Gov. Kwon has taken the initiative in conducting intensive inquiries into major banks for alleged lending irregularities.

“Their irregular loan issuances produce victims. We cannot tolerate the practices in terms of protection of financial consumers,” an FSS official said.

Due to the irregular lending, many borrowers saw losses from investing in high-risk funds or now suffer from the burden of paying unnecessary insurance premiums, he said.

He said it seems that financial companies ― both Korean and foreign ones operating here ― have enjoyed easy sales thanks to improper lending.

The FSC, the decision-making panel of the FSS, will set the sanction level against rule-violators next month.

An FSS task force conducted inquiries on eight banks between July and September in 2011 and the regulator carried out periodical probes on two commercial banks.

The 10 banks were Woori, Shinhan, Hana, Busan, Jeju, Citibank Korea, Standard Chartered Bank Korea, Industrial Bank of Korea, NH Bank and the National Federation of Fisheries Cooperatives.

Apart from levying fines on rule-violating banks, the FSS, in collaboration with investigative agencies, plans to seek imprisonment for bank employees who urged customers to buy other financial products in exchange for issuing loans.

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