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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] SEOUL, July 25, 2024 — The Financial Supervisory Service (FSS) has begun formal disciplinary proceedings against IBK Industrial Bank of Korea (IBK) following the revelation of an KRW 88.2 billion (USD 64 million) improper loan case.
According to financial industry sources, earlier this month the FSS sent an inspection opinion letter to IBK — effectively a pre-notification of sanctions. This comes roughly five months after the FSS concluded its special on-site inspection of the bank in February.
The opinion letter outlines violations and irregularities uncovered during the inspection, which will form the basis for determining the level of sanctions.
The FSS is reportedly considering serious disciplinary measures, including an “institutional warning” or stronger. Under Korean financial law, sanctions range from license revocation, business suspension, corrective orders, institutional warnings, to cautions — with institutional warnings and above classified as “heavy sanctions” that restrict new business approvals.
An FSS official stated:
“The matter is grave enough that we are considering heavy sanctions. However, the final severity may change depending on IBK’s explanation and the outcome of the ongoing prosecution investigation.”
Some industry observers suggest the possibility of even harsher measures, such as a partial business suspension. For reference, BNK Kyongnam Bank, which suffered a KRW 350 billion embezzlement case, was ordered to suspend real estate project financing (PF) operations for six months.
IBK is currently preparing a formal written explanation (답변서). Normally, banks must submit this response within 2–3 weeks of receiving the inspection letter, but IBK is taking additional time due to the large number of employees involved, which requires extensive fact-checking and rebuttals.
Once IBK submits its response, the FSS will draft a sanction proposal, which will undergo deliberation by the Sanctions Review Committee, the Securities and Futures Commission, and final approval by the Financial Services Commission (FSC).
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
