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IBK Industrial Bank of Korea. (Photo Courtesy of IBK Industrial Bank of Korea) |
[Alpha Biz= Kim Sangjin] The Financial Supervisory Service (FSS) is set to conclude its on-site investigation into IBK Industrial Bank of Korea this week, following a ₩24 billion ($240 million) illegal loan scandal.
According to financial industry sources on Monday, the FSS initiated the investigation on January 3 and plans to wrap it up before the Lunar New Year holiday. Originally expected to last one week, the probe was extended to three weeks.
A senior FSS official stated, “The number of [illegal loan] cases was higher than initially anticipated, and the involvement of multiple current and former employees required a more in-depth review.”
IBK identified the issue during an internal audit, discovering that branches and loan centers in Seoul's Gangdong and Seongbuk districts had inflated real estate collateral values to approve larger loans.
While the initial report estimated the losses at around ₩10 billion, the FSS investigation uncovered additional illegal loans, raising the total to ₩24 billion. This figure may increase further as the investigation progresses.
The method involved inflating real estate collateral values—e.g., appraising a property worth ₩5 billion as ₩10 billion, enabling a loan exceeding the actual collateral value. Such fraudulent practices, known as "loan inflation," have become increasingly frequent since last year. The incidents typically fall into two categories: negligence in verifying forged or falsified documents or collusion between bank employees and borrowers.
The current case is suspected to involve collusion. The borrower, a retired IBK employee involved in real estate development, allegedly collaborated with three branch managers and one loan center director, who were his former colleagues. The FSS is also investigating allegations that the retired employee offered perks, such as golf outings, to current staff members.
Alphabiz Reporter Kim SangJin(letyou@alphabiz.co.kr)
