FSS warns banks' overseas branches on weak risk management

The overseas corporations of major South Korean banking groups have been recommended to build up their pre-emptive risk management capacities, according to financial supervisors.

The Financial Supervisory Service recently issued an attention-level management recommendation to Woori America Bank, the US corporation of Woori Bank, asking that it level out its loan portfolio, officials said Wednesday.

As the notice is a nonbinding administrative guidance, it is up to the company to voluntarily make the required change.

Woori America Bank revised its internal regulations in August last year, raising secured loans for commercial properties to 400 percent, exceeding the 300 percent level recommended by the US government.

Citing ongoing gestures at an interest rate hike and the possibility of a real estate price fall, the FSS requested the bank reinforce credit risk capacities by diversifying loan products and spreading out assets.

The financial watchdog also pointed out that Woori Bank’s headquarters had failed to properly supervise overseas corporations.

SBJ Bank, the Japanese subsidiary of Shinhan Bank, received a similar warning for excessively expanding its mortgage housing loan, which the FSS saw as causing an imbalance between the bank’s financing and management portfolio.

The bank was recommended to apply a more conservative standard when forecasting housing loan market conditions in the future.

The New York office of Kookmin Bank and Osaka office of KEB Hana Bank were also given notices, respectively, for their insufficient performance evaluation system for compliance officers and at-fault analysis on credit limits.

“Primary actions should come from the corresponding corporations and offices, but their headquarters should also exert more efforts to reinforce the financial soundness and risk management capability of their overseas network,” said an FSS official.

By Bae Hyun-jung (tellme@heraldcorp.com)