8 lenders come under fire for unlawful practices
By Kim Jae-won
A total of eight lenders, including two foreign-invested banks, will be punished for illegal product sales, the financial watchdog said Thursday.
The Financial Supervisory Service (FSS) found that eight commercial banks ― Citibank, Standard Chartered Bank in Korea (SCBK), Shinhan Bank, Industrial Bank of Korea, Busan Bank, Jeju Bank, Nonghyup and Suhyup ― combined to illegally sell some 1,000 financial products.
They forced customers who wanted to borrow money to buy their products and services. Customers, mostly from cash-strapped small enterprises, had no choice but to open needless accounts and take out insurance policies to receive loans.
“We will hold a disciplinary committee meeting to decide the level of punishment,” said Hwang Dae-seong, a senior FSS official.
The FSS can recommend that financial companies impose a wide range of punishments on their employees and executives who violated the regulations, from warnings and salary cuts to dismissal. Sources familiar with the matter say each bank will face fines ranging from 25 to 50 million won depending on their involvement.
Hwang said the results will be announced in February after receivng approval from the top financial decision maker, the Financial Services Commission.
Industry watchers say the illegal schemes are still prevalent in the industry despite the financial authorities’ repeated promises to crack down on them.
Experts say banks target cash-strapped small- and medium-sized enterprises (SMEs), which desperately need fresh funding, who have little choice but to comply.
“Most of the victims are SMEs suffering from a liquidity crunch. They cannot help but accept whatever the banks say,” said Jeon Hyo-chan, a senior economist at Samsung Economic Research Institute.
In contrast, banks treat big companies with abundant cash flows differently, providing many benefits unavailable to smaller firms.
Jeon said lenders can kill two birds with one stone with their “arm-twisting” strategies as they can increase deposits and loans at the same time.
Observers say that it is disappointing to see that foreign-invested banks such as Citibank and SCBK, which have been boastful of their “advanced financing skills,” were included on the list.
Both declined to comment, citing the financial authorities’ ongoing disciplinary process.
Observers say lenders are overlooking the illegal practices, if not encouraging them, as employees are under pressure to show better results in product sales, a key factor in evaluating a bank’s performance.