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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] SEOUL, October 27, 2025 — Despite repeated cases of improper lending to bank employees’ relatives, a new report by South Korea’s National Assembly has revealed that one-third of domestic banks still lack adequate internal controls to prevent insider-linked loans.
According to data submitted to Rep. Kim Sang-hoon of the National Policy Committee by the Financial Supervisory Service (FSS), 6 out of 18 commercial banks either have no monitoring system in place or operate only basic alert notifications when an employee’s family member applies for a loan.
The strongest level of oversight—adopted by just 10 banks nationwide—involves maintaining a centralized database of all employees and their relatives, which automatically cross-checks loan applications to identify potential conflicts of interest before credit screening begins.
Among the five major lenders, Shinhan Bank and Hana Bank have implemented such data-driven systems. Regional banks including iM Bank, Busan Bank, Kyongnam Bank, Jeonbuk Bank, Jeju Bank, and Standard Chartered Korea also use comparable monitoring programs.
However, recent scandals have prompted lagging institutions to act. Woori Bank, which faced controversy over alleged preferential loans to relatives of former Woori Financial Chairman Sohn Tae-seung, has since strengthened its controls—reporting that 100% of employees and 70.3% of family members are now registered in its compliance database as of October 2025.
Similarly, IBK (Industrial Bank of Korea), after several large-scale loan irregularities, completed 100% registration for all executives earlier this year as part of a belated internal control overhaul.
Still, eight banks remain without full systems, including KB Kookmin Bank, NH NongHyup Bank, Gwangju Bank, and Sh Suhyup Bank.
Notably, Suhyup Bank had once operated an internal control mechanism but suspended it in April 2021, citing data privacy concerns. The bank confirmed that it deleted all stored employee-family data and stopped using the information to block related-party loan approvals.
In its written response to the National Assembly, Suhyup stated:
“We previously used dependent-family data from payroll systems for internal controls, but ceased doing so after determining it may conflict with personal information protection rules.”
As a result, Suhyup Bank currently lacks any automated alerts or blocking mechanisms for family-related loans—effectively leaving no safeguards against potential insider lending.
Observers note that despite multiple high-profile misconduct cases and parliamentary scrutiny, internal control standards across the Korean banking sector remain uneven, prompting calls for FSS-led regulatory harmonization and mandatory compliance audits.
알파경제 Paul Lee 특파원(hoondork1977@alphabiz.co.kr)
