Four major banks under probe over irregular lending

The nation’s top financial regulator is investigating four major commercial banks in connection with lending irregularities, banking sources said Wednesday.

Kookmin, Woori, Shinhan and Hana banks are suspected of forcing borrowers to buy their financial products including time deposits, pension and insurance in exchange for lending, they said.

The Financial Supervisory Service has recently completed its preliminary inquiry and will begin a full-fledged probe as early as next week, according the sources.

“The FSS has already collected basic documents through its preliminary probe over the past few weeks,” an industry official close to the matter told The Korea Herald.

Another source said, “As far as I know, the regulatory body is considering dispatching 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 plan for an expanded probe.

“Because of manpower problems, it is not easy for us to send inspectors to those banks simultaneously,” he said.

He said the four lenders may be subject to a full-scale probe “in turn,” even though the FSS has recently increased the number of inspectors.

His department was set up several months ago under FSS Governor Kwon Hyouk-se’s initiative to better protect consumer rights and curb irregularities.

The financial authorities have enhanced their crackdown on the practice of linking bank credit to purchases of their financial products.

But legal loopholes made it difficult for the regulator to take punitive action against violators.

The National Assembly has been reviewing a revised bill on enhance regulations, which has already been approved by the Legislation and Judiciary Committee.

The bill would clearly ban the practice and dictate that violators are given penalties.

FSS officials are further working with the Financial Services Commission to establish detailed regulations.

By Cynthia J. Kim (cynthiak@heraldcorp.com)