2012-07-18 16:39
Woori Financial audits bank affiliate
Woori Financial Group audited its biggest subsidiary Woori Bank for two months, according to officials Wednesday. The holding company found 30 insolvent loans worth 10 billion won from May 7 to July 6, and plans to punish those who authorized them. It is rare for a holding company to audit its subsidiary for over 40 days. The nation’s largest financial group said the move was due to the increasing number of nonperforming loans from Woori Bank compared to its counterparts and the company was concerned that its share prices would decline.
As much as 10 trillion won lent by the bank soured over the past five years. Among them, 2 trillion became insolvent last year. The group’s flagship firm is reportedly displeased about the audit as it found no legitimate reason to be investigated. The recent audit is the first in nearly two years. The holdings company audited its bank affiliate for bad project financing loans in 2010 and for poor investments in derivative products credit default swap and collateralized debt obligations in 2009. Many speculate that the audit is part of a power struggle between Woori Group Chairman Lee Pal-seung and Woori Bank President Lee Soon-woo. The two heads have clashed over an issue of separation of Woori Card from Woori Bank earlier this year. The power struggle comes as the banking subsidiary’s asset is near equal that of the holding company’s, causing a continuous internal struggle between the two. Lee Soon-woo took over as head of the bank from former president Lee Chong-hwi, while Lee Pal-seung was elected for a second term as group chairman the same year. The Woori Bank president stated last month that it will improve the quality of its assets as the nation suffers from economic woes such as rising household debt and the financial crisis in Europe. If borrowers are forced to default on loans, the damage to domestic lenders will be severe. The bank is targeting a 7 percent increase in its assets this year. |
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