FSS Delays Inspection Results for Woori Bank and Other Institutions to Next Year

The Financial Supervisory Service (FSS) has decided to delay the release of inspection results for Woori Bank and other financial institutions until early next year, considering the economic situation impacted by martial law and the impeachment crisis.

FSS Governor Lee Bok-hyun announced during a financial situation review meeting on Dec. 11, stating, “Considering the current economic situation and financial conditions, we will postpone the announcement of major inspection results for Woori Bank and the financial sector to early next year.” This reflects the need to manage the pace of announcement, considering the potential fallout of the martial law and impeachment crisis on the financial sector.

Governor Lee had been pressuring Chairman Yim Jong-ryong recently, citing that illegal loans were confirmed to have been granted to relatives of former Woori Financial Group Chairman Sohn Tae-seung during Yim's tenure. At the end of last month, Lee stated, “We plan to examine whether the board was properly informed about these improper loans and why internal controls failed to function. We will announce the results of this inspection, including these matters, by December.” The FSS had initially planned to announce the inspection results following its regular audit of Woori Financial Group and Woori Bank, conducted from October to Nov. 29.

Woori Bank is under investigation by prosecutors for allegations of granting improper loans worth tens of billions of won to corporations or individual businesses related to former Chairman Sohn’s relatives between Apr. 3, 2020, and Jan. 16 of this year. The FSS stated that its regular inspection of Woori Financial Group and Woori Bank covered not only these improper loans but also capital ratios, asset soundness, internal controls, risk management, and corporate governance.

The results of this regular inspection serve as the basis for the financial authorities to assess whether Woori Financial Group faces any risks related to capital ratio management or adequacy when pursuing new businesses like mergers and acquisitions (M&A) of Tongyang and ABL Life Insurance. This inspection revealed that the Common Equity Tier 1 (CET1) ratio management of Woori Financial Group and Woori Bank was insufficient, with Woori Financial’s CET1 ratio standing at 12 percent in the third quarter, falling short of the regulatory recommendation of 13 percent.