Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
Why financial scandals persist at Woori despite tightened supervision
Prosecutors confiscate evidence from Woori Bank's headquarters in Seoul, Tuesday. Yonhap
By Lee Yeon-woo
Organizational culture reforms urgent for internal control: market watchers
Woori Financial Group has been grappling with a series of large-scale financial crimes within its key subsidiary Woori Bank. Despite repeated promises to strengthen oversight, market watchers believe that deeper cultural changes are necessary to prevent further issues.
"Woori Bank's recent loan controversy highlights ongoing governance and oversight weakness within the institution, adding to its history of internal control failures," Rena Kwok, a credit analyst at Bloomberg Intelligence, told The Korea Times.
She was referring to a case where Woori Bank issued 42 loans totaling 61.6 billion won ($46.14 million) to individuals connected to former Woori Financial Group Chairman Son Tae-seung, between April 2020 and this January. An investigation by the Financial Supervisory Service (FSS) found that 28 of the loans, amounting to 35 billion won, were granted improperly due to Son's influence.
"Woori's actions have reached a point where trust is becoming difficult to maintain," FSS Governor Lee Bok-hyun said during a staff meeting on Aug. 20.
This was not the first instance of financial misconduct at Woori.
In 2022, Woori Bank was embroiled in a significant employment embezzlement case involving about 70 billion won. Most recently, in June, a local branch was implicated in an 18 billion won embezzlement case involving forged loan applications.
Former Woori Financial Group Chairman Son Tae-seung / Yonhap
According to the FSS data, Woori recorded the highest amount of embezzlement among 17 domestic banks, totaling 77.27 billion won. It also had the most employees involved, with a total of 31 people. The data was submitted to and released by Rep. Oh Gi-hyoung of the main opposition Democratic Party of Korea.
Over the past two years, Woori has implemented several initiatives to prevent further mishaps, including improvements in inspection processes and oversight systems. Last June, the bank even highlighted its recognition by the FSS as a model for effective internal controls.
However, despite these efforts, issues related to inadequate internal controls continue to surface.
Industry insiders contacted by The Korea Times say the root problem lies in the organizational culture — particularly the authoritarian leadership style of the holding company's chairman, which they say played a role in the latest loan controversy.
"I cannot say that operational systems or skills across banks are significantly different. This means that it's an issue of organizational culture," one industry official said, requesting anonymity due to the sensitivity of the issue.
"While systems have improved, there's still a lack of a culture that truly values and enforces internal controls," another official added, also speaking on condition of anonymity.
Former employees have left comments on Job Planet, a platform where employees share company information, noting that Woori's "change is slower compared to competitors," and there is a "tendency to hush up internal unrest." One remarked that "aligning with the right people seems crucial" in the bank.
It is known that Woori Bank continues to struggle with internal factional conflicts, a lingering issue since its formation through the merger of Commercial Bank of Korea and Hanil Bank after the Asian financial crisis in 1998.
Financial Supervisory Service Governor Lee Bok-hyun speaks during a meeting at NH NongHyup Bank's headquarters in Seoul, Aug. 23. Yonhap
The FSS also suspects that the current management was aware of the recent loan incident early on, but neglected their obligation to report it to the authorities.
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The FSS has been engaging in various discussions to address the industry's authoritarian leadership style, including proposals for improving corporate governance and restructuring responsibilities.
"To prevent the recurrence of incomplete sales and financial incidents, changing the mindset and behavior of employees is paramount. The CEO, in particular, should cultivate a culture where every employee feels empowered to openly raise concerns whenever they sense the potential issues," Lee said during the meeting with local bank heads on June 19.
In response to mounting concerns over accountability, Woori Bank announced initiatives aimed at improving its credit management system. The bank has also committed to swiftly implementing follow-up measures and complying with sanctions based on the outcomes of regulatory inspections.
"We must seize this opportunity for a complete transformation of everything we've taken for granted, including corporate culture, business practices, hierarchical relationships and internal control systems," the group's current Chairman Yim Jong-yong said in an apology on Aug. 12, a day after the news first broke.
Kwok noted that Woori's challenges reflect broader systemic issues in Korea's financial sector, "where weak controls and concentration of power have raised concerns about stability and regulatory effectiveness, possibly undermining investor confidence."