Starting with Hana Bank, NH NongHyup Bank, and the National Agricultural Cooperative Federation, the Financial Supervisory Service will launch inspections into the misuse of sole proprietors' loans for purposes other than purchasing dwellings.
According to the financial authorities on the 29th, the Financial Supervisory Service (FSS) will begin on-site inspections on the 30th at Hana Bank and NH NongHyup Bank to check for the misuse of business loans in the banking sector. In the mutual finance sector, the first target is the National Agricultural Cooperative Federation.
The inspections are being carried out to catch "misuse for purposes other than intended," in which business loans are used to purchase dwellings, as part of the government's response to illegal and irregular real estate transaction practices. The Financial Supervisory Service (FSS) plans to gradually expand the scope of on-site inspections.
President Lee Jae-myung noted on X (formerly Twitter) on the 17th that "if a financial institution refuses to extend a real estate purchase loan out of concern it will be used for speculation, and someone disguises it as business funds to obtain a loan and then uses it to buy real estate, that constitutes fraud and is subject to criminal punishment."
The Financial Supervisory Service (FSS) placed at the top of its inspection priority list banks and mutual finance institutions such as the Korean Federation of Community Credit Cooperatives (KFCC), NongHyup, and credit unions in the three Gangnam districts (Gangnam, Seocho, and Songpa), where misuse for purposes other than intended is suspected to occur frequently. The authorities' representative red flags for such misuse include: ▲ concentrated business loans occurring in the three Gangnam districts ▲ borrowers whose business registration and loan dates are close together ▲ cases where there is a large discrepancy between the branch handling the loan and the building's address.
The Financial Supervisory Service (FSS) will also conduct intensive inspections into "fraudulent fabricated loans," which mainly occur at mutual finance institutions. A representative example of circumventing business loan rules is when a borrower falsely lists working capital for a sole proprietorship as the loan purpose on paper, but actually uses the funds to purchase dwellings.
If financial companies and their employees could reasonably have recognized the circumvention in the use of business loans but failed to manage or oversee it, they will face strong administrative sanctions under the current lending review provisions. If financial company employees or borrowers are involved in forging or altering private documents, they will also be investigated by law enforcement.
At a monthly press briefing on the 26th, Financial Supervisory Service (FSS) Governor Lee Chan-jin said, "Regarding misuse for purposes other than intended in business loans, we are classifying high-risk loans into four categories. We will soon commence on-site inspections of the banking sector and mutual finance institutions," adding, "If conduct goes beyond regulatory violations and amounts to criminal acts, we will notify investigative authorities and proceed with criminal procedures."