Financial regulators recently uncovered a variety of irregular business practices of NongHyup Bank, adding to the lender’s loss totaling 55 billion won ($47.8 million) that was publicized last week.
The flagship unit of NongHyup Financial Group was found to have engaged in unauthorized lending worth 41.4 billion won, according to the Financial Supervisory Service on Monday.
“In violation of the law, the bank’s bancassurance (sale of insurance products via bank branches) salespeople of were implicated in 796 irregular loan cases,” said an FSS official.
He said 37 insurance salespeople were involved in 41.4 billion won worth of irregular loans within three months in 2012.
The nation’s laws on the insurance business “ban insurance salespeople from engaging in unfair practices including loan issuance.”
Market insiders alleged that the bank had pressured borrowers to buy insurance products in exchange for endorsing their loan application, which is considered a conventional malfeasance abusing financial consumers.
Over the past few years, the bank committed unfair or illicit lending practices despite sanctions from financial regulators. The FSS previously imposed fines of 50 million won on NongHyup Bank for engaging in unauthorized lending between 2009 and 2011.
The FSS also revealed that NongHyup Bank incurred losses totaling 345.8 billion won after issuing real estate project loans worth 655 billion won.
“The bank is considered to have conducted lax screening of the project financing applications,” an official said. “The soured loans were attributable to borrowers’ failure in apartment and golf course businesses.”
In addition, regulatory officials noted that the bank approved the loan application worth 6.3 trillion won from its affiliate National Agricultural Cooperative Federation without assessing its eligibility.
“It also provided the NACF with an irregular loan rate discount,” an official said. “Though the annual rate was originally calculated at 5.79 percent, NongHyup Bank offered a 5.27 percent rate.”
By Kim Yon-se (
kys@heraldcorp.com)
