FSC to work closely with prosecution to weed out irregular lending
Regulators have decided to call for the prosecution or police to investigate financial industry employees engaged in irregular sales practices.
Bank employees, who urge customers to buy other financial products in exchange for issuing loans could be subject to imprisonment under regulators’ coordination with the investigative agencies, the Financial Services Commission said Monday.
While the figures engaged in the practices have been subject to fines at a maximum of 50 million won ($43,800), those will face fines up to 100 million won or imprisonment up to three years under the revised laws.
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(Yonhap News) |
In addition, the FSC said, employees in the insurance sector, who fail to inform customers of key contract terms, will also face criminal punishment.
“The revised laws are aimed at protecting the rights of financial consumers and prevent banks from issuing loans recklessly despite snowballing household debt,” an official said.
In a similar vein, regulators are set to levy penalties on several banks for habitual irregular loan issuances which burdened borrowers.
Over the past few months, the Financial Supervisory Service, an executive arm of the FSC, carried out full-fledged inquiries into major commercial banks for their allegedly irregular practices.
Among the lenders are Woori Bank, Shinhan Bank, Hana Bank and Industrial Bank of Korea.
Shinhan Bank has reportedly been implicated in improper practices of linking loans to purchases of other financial products.
Sources said a number of individual customers of the commercial bank were urged to purchase insurance products or to apply for credit cards.
According to consumers’ complaints filed with the FSS, Industrial Bank of Korea has been suspected of forcing a number of small- and mid-sized enterprises to buy its financial products in exchange for issuing business loans.
IBK has also been suspected of urging smaller business owners with low credit to buy time deposits in return for issuing credit cards, sources said.
During the National Assembly’s audit on financial regulators last October, FSS Gov. Kwon Hyouk-se said that about 300 unfair lending cases were uncovered at the state-run IBK.
“Between mid-July and mid-September, we probed irregular lending allegations of eight banks including Industrial Bank of Korea,” he said. “We plan to take stern action (against rule-violators).”
Meanwhile, a ruling party lawmaker alleged that the Korea Development Bank also engaged in similar practices.
Rep. Lee Sung-hun of the Grand National Party said the state-run KDB saw deposits from corporate customers surge by 4 trillion won in two months ― to 12 trillion won in August from 8 trillion won in June.
During the National Assembly’s audit on the bank last week, he said it was suspected of forcing corporate borrowers to buy deposit products on condition of issuing loans to them.
Citing data at the Board of Audit and inspection, the lawmaker said 11 out of the 59 KDB branches engaged in the practices
BAI data showed that 27 irregular cases, totaling 24.9 billion won in deposits, were uncovered at the bank over the past few years.
By Kim Yon-se (
kys@heraldcorp.com)
