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Korean authorities discipline financial institutions over breaches

Korean authorities discipline financial institutions over breaches

As many as nine state funded financial institutions were subjected to disciplinary action by the Korea Deposit Insurance Corp (KDIC) in the first quarter for failing to fulfil management normalisation plans. In a mandatory review of the quarterly performance of 13 public fund injected financial institutions, the KDIC said yesterday that nine state funded institutions in the first quarter of the year failed to meet terms and conditions of the memorandum of understanding (MOU) signed with the KDIC.

According to the review, SeoulBank failed to meet conditions required by the MOU in such sectors as sales management cost rate and per capita operational income for the third consecutive month in the first quarter, leading the Board of Audit and Inspection to urge the KDIC to reprimand the bank's president.

Seoul, which is expected to merge with Hana, was also unable to meet the target for its Bank for International Settlements capital adequacy ratio for the second straight month, with the ratio standing at 10.1 percent, well below the proposed 10.6 percent.

Consequently, the KDIC issued a disciplinary warning to the head of SeoulBank, while banning the bank from revising any welfare related systems, including wage hikes, until such time as conditions required by the MOU were fulfilled.

Chohung Bank failed to achieve its targeted return on assets (ROA), with ROA remaining at a mere 0.1 percent, well below the demanded 0.5 percent.

Chohung received a disciplinary warning from the Financial Supervisory Service on May 23 for not transferring its headquarters outside of Seoul as scheduled.

The bank earlier promised to move its headquarters, currently located in Seoul, to Chungchong Province in return for the bank being able to stand on its own feet. Chohung has yet to fulfil its promise.

Woori Financial Holding Co was ordered to reprimand an employee at Woori Finance Information System, a subsidiary of the financial group, for paying an excessive bonus to the subsidiary's former worker.

Meanwhile, Korea Investment Trust Management & Securities and Daehan Investment Trust Management & Securities showed unsatisfactory performances in managing risks of unsold negotiable securities and covering losses related to collateralised bond obligation subordinate bonds.

Seoul Guarantee Insurance and Korealife Insurance as well as Daehan Investment Trust were instructed to make up for their wage systems by the KDIC.

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