South Korean financial sector faces disciplinary actions and new inclusive finance reforms

Major South Korean banks have faced significant disciplinary actions over the past five years. Data submitted to the National Assembly reveals that between January 2021 and August 2024, five major banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—recorded a total of 1,766 disciplinary cases. Approximately 31.9% of these cases were related to credit business, including negligence in loan screening, processing, and post-management. Other disciplinary reasons included embezzlement, sexual misconduct, workplace harassment, and mismanagement of cash.

In a separate regulatory move, the Financial Services Commission (FSC) announced a new evaluation system for inclusive finance. The FSC plans to evaluate 17 domestic banks across five categories: governance, fund supply, debt restructuring, social consideration, and non-financial support. The results will be disclosed annually and linked to contributions to the Korea Inclusive Finance Agency and fines under the Financial Consumer Protection Act.

Additionally, the FSC is reforming how public financial institutions manage delinquent debts. New principles dictate that for debtors without repayment ability, the statute of limitations will be completed five years after delinquency, and debts older than 15 years will be sequentially incinerated. This includes the planned incineration of 4.9 trillion won in long-term delinquent claims.