Financial watchdog probes unusual bank loans in Choi scandal

Published : Oct 31, 2016 - 10:29 Updated : Oct 31, 2016 - 10:34

South Korea's financial authorities are looking into whether a local bank has extended illicit or preferential loans to President Park Geun-hye's friend at the heart of a massive influence-peddling scandal and her daughter, officials said Monday.

Choi Soon-sil, known as a longtime confidante to Park, and her daughter Chung Yoo-ra, currently a college student, are alleged to have taken out foreign exchange loans illegally or at least with preferential treatment from KEB Hana Bank, the largest lender here.

South Korea's Finance Minister Yoo Il-ho (L) speaks at a ministerial-level meeting in Seoul on Oct. 31, 2016. (Yonhap)

They received a loan of around 250,000 euros ($270,000) by using their land in Pyeongchang in the eastern province of Gangwon as collateral in late 2015, just months before moving to Europe.

They used a letter of payment guarantee from the bank to get the money in Germany, a borrowing process common among trading companies, according to Rep. Jung Jae-ho of the main opposition Minjoo Party.

It's apparently aimed at covering the tracks of their financial transactions, he argued.

"We are working to figure out the relevant facts," an official at the Financial Supervisory Service (FSS) said, citing a comprehensive audit of KEB Hana Bank.

The watchdog has prolonged the regular audit through Friday rather than launching a separate special probe.

The FSS is also closely monitoring the possibility of additional suspicions regarding Choi's financial transactions.

The bank, however, has flatly denied any illegal loans or other special favors for Choi and her daughter, saying it issued the letter of payment guarantee only to confirm the authenticity of the collateral assets located in South Korea, not in Europe.

Meanwhile, South Korea's top financial regulator has called for unswerving efforts for financial reform despite the political scandal rocking the country.

"Financial reform should go on," Yim Jong-yong, chairman of the Financial Services Commission (FSC), said in a message to other FSC officials. "We should be desperate for completing (it) under any circumstances for the future of South Korea's finance."

He stressed the need for an "unswerving and consistent" financial policy, saying it will be able to give some comfort to the people concerned about the political crisis. (Yonhap)