After the downgrade of Woori Financial Group to 'grade 3' in the management assessment, controversies related to rushed reviews and fairness arose, leading the Financial Supervisory Service (FSS) to unusually announce the background of the rating decision. With speculation that FSS Governor Lee Bok-hyun had already made a conclusion and swiftly lowered the rating, it seems he initiated damage control.
On the 19th, the FSS distributed a reference material titled 'Explanation of the Management Assessment Results for Woori Financial,' stating, "As deficiencies were found in internal control and risk management following the regular inspection of Woori Financial, the management assessment grade was lowered to grade 3."
The FSS listed the reasons behind the downgrade of Woori Financial in the management assessment grade to grade 3 in this document. The FSS stated that Woori Financial had inadequacies in preliminary reviews during significant management decisions, such as mergers and acquisitions (M&A) of subsidiaries. It pointed out issues that arose during the M&A process with Tongyang and ABL Life.
The FSS also mentioned that last month, Yim Jong-ryong, chairman of Woori Financial, proceeded with board meetings without risk deliberation and disregarding internal regulations regarding the M&A process of Tongyang and ABL Life. According to Woori Financial's internal regulations, preliminary consideration by the Risk Management Committee is required for major management matters like M&A, and the results of this consideration must be reflected in the board's decision. However, the FSS judged that Chairman Yim ignored these procedures and proceeded with the board meeting.
The FSS also raised concerns about a loan scandal involving 730 billion won related to the former chairman of Woori Financial, Son Tae-sung. The FSS noted, "There was inadequate management of major subsidiaries’ large and repeated improper loans and financial incidents." It added, "Compared to other financial groups, it is assessed to be somewhat inadequate in terms of risk management."
The FSS explained the reason why the management assessment grade was hurriedly released. Typically, it takes about a year for the FSS to finalize the results after completing regular inspections, but the decision for Woori Financial's management assessment grade was made in three months. The FSS said, "As Woori Financial applied for approval to incorporate Tongyang and ABL Life as subsidiaries last January, we prioritized separating and expediting the management assessment part for an objective and reasonable review reflecting the latest management status," adding that it dispatched a large number of examination and review personnel for quick processing.
The FSS notified Woori Financial of the management assessment results on the 18th and plans to report to the Financial Services Commission (FSC) soon. The final approval authority for Woori Financial’s acquisition of the insurance company and subsidiary incorporation rests with the FSC. The FSS stated, "We are reviewing additional materials received from Woori Financial, such as plans for improving internal control, and we will report our review opinions to the FSC in a timely manner."