[비즈한국] Controversy is mounting over non-performing loans extended to relatives of Son Tae-seung, the former chairman of Woori Financial Group316140. The core of the issue, which came to light following an investigation by the Financial Supervisory Service (FSS), is that Woori Bank failed to follow proper procedures or incurred losses while issuing loans to companies where relatives of the former chairman served as past or current executives or major shareholders. Woori Bank has begun damage control by explaining its sanctions and follow-up measures, but the future trajectory of the situation is expected to depend on whether Son was involved.
Character
Former Woori Financial Group Chairman Son Tae-seung was born in Gwangju on May 16, 1959. He graduated from Jeonju High School, earned a bachelor’s degree in law from Sungkyunkwan University, a master’s degree in law from Seoul National University, and an MBA from Helsinki School of Economics. Son began his career with Woori Financial in 1987 when he joined Hanil Bank, the predecessor to Woori Bank. Known as a "salaryman legend," he worked his way up from a regular employee over 30 years to become bank president and group chairman. During his time at Woori Bank, Son was considered a global expert and was highly regarded for his exceptional work performance, consistently exceeding targets in his assigned areas.
Career
Son held various positions in strategic planning, sales, and global divisions within Woori Bank. After serving as the head of the strategic planning department in 2003, he spent four years as the head of the bank’s Los Angeles branch starting in 2006. Upon returning from the U.S., he served as an executive at Woori Financial Group in 2010 and as the head of the Gwanak-Dongjak sales headquarters for Woori Bank in 2012. In 2014, he served as an executive of the bank’s capital market division and deputy president of the global business division. He had been working as the head of Woori Bank’s global group since 2015.
In November 2017, he became the acting president of Woori Bank following the resignation of former president Lee Kwang-goo due to recruitment scandal allegations. Recognized for his management skills and leadership, he was appointed the 51st president of Woori Bank in December of that year. When Woori Bank decided to transition into a financial holding company in June 2018 and subsequently established the Woori Financial Group corporate entity in January 2019, Son served as both the bank president and the inaugural chairman of the holding company.
In March 2020, Son was appointed as representative director and inside director at the first regular general shareholders' meeting of Woori Financial Group, successfully securing a second term as chairman. Although the FSS issued a major sanction of a disciplinary warning to Son in February regarding the incomplete sale of overseas interest-linked derivative-linked funds (DLF) by Woori Bank, Son continued in his role after winning lawsuits for the suspension of the disciplinary action and its cancellation. He decided not to seek another term in January 2023 and stepped down from his position that March.
Capability
Former Chairman Son played a pivotal role at every major turning point for Woori Bank, including its transition to a holding company, its re-launch, and its full privatization. While at Woori Bank, Son was promoted to head of the strategic planning department in recognition of his contributions to the launch of Woori Financial in 2001, which was the first financial holding company in Korea.
Later, as the government pushed for privatization to recover public funds, Woori Financial reverted to a bank-only system before being re-launched as Woori Financial Group in January 2019. At the time, Son, who was concurrently serving as bank president, led mergers and acquisitions (M&A) to strengthen non-banking sectors, including Dongyang Asset Management (now Woori Asset Management), ABL Global Asset Management (now Woori Global Asset Management), and International Asset Trust (now Woori Asset Trust). The following year, the group also acquired Ajou Capital (now Woori Financial Capital) and Ajou Savings Bank (now Woori Financial Savings Bank).
He also succeeded in improving the company's profitability. In 2020, the Woori Financial Group’s executive recommendation committee praised his performance, stating, "He achieved record-high ordinary profits and the highest level of asset quality in the industry," adding that "he achieved qualitative growth, including global revenue exceeding 10% of the total."
In 2021, he achieved the full privatization of Woori Financial, which had long been a goal for the group, following the Korea Deposit Insurance Corporation's announcement of the sale of its remaining 9.33% stake. In December 2021, Son stated, "With full privatization as a turning point, we will repay our customers with better financial services based on a more transparent and stable governance structure."
Critical
A massive loss event involving derivative-linked funds (DLF) occurred in 2019, while Son was serving as the president of Woori Bank. DLFs are high-risk products that result in principal loss if the interest rates of German government bonds, among others, fall below a certain level. Woori Bank was sanctioned by financial authorities in March 2020 after it was found that the bank had sold DLFs to customers between 2018 and 2019 by misrepresenting them as safe assets or failing to disclose the risk of 100% principal loss.
Although financial authorities held Son accountable for poor internal controls, the court ruled in his favor, overturning the disciplinary action on the grounds that he had not violated the duty to establish internal control standards. However, because the losses incurred by customers amounted to 50 billion won, civic groups and others voiced opposition to his reappointment, arguing that "management must also be held responsible."
While Son won his battle against financial authorities regarding the DLF disciplinary action, the conflict did not end with his retirement. On August 12 of this year, the FSS announced the results of an ad-hoc inspection, stating, "Non-performing loans were issued to borrowers related to former Chairman Son between April 2020 and January 2024."
A total of 42 loans (worth 61.6 billion won) were executed. According to the FSS, 28 of these (35 billion won) were processed without following standard criteria or procedures during the loan review and follow-up management process, and 19 (26.9 billion won) have already defaulted or are currently in arrears. Because the period during which these loans were issued immediately followed his appointment as group chairman, the former chairman is finding it difficult to avoid public criticism.
Challenges
Although Son has maintained that he has no connection to the non-performing loans related to his relatives, the core of the issue will likely be whether he was aware of the loans and whether he intervened. The FSS stated, "We will review whether financial laws were violated and report the illegal allegations of the borrowers and others to investigative agencies."
The current chairman has also stepped in to address the situation. During an emergency meeting attended by Woori Financial and Woori Bank executives on August 12, Woori Financial Group Chairman Yim Jong-yong stated, "I am sincerely sorry to the customers who trusted Woori Financial," and, "I apologize that while we noticed the problem earlier this year and tried to correct it internally, the situation has escalated." He added, "This is an unavoidable responsibility for management. We will cooperate fully with the investigation process and expedite the recovery of the loans."
While Woori Bank has also taken immediate action, the fallout continues to grow. Woori Bank stated that it had identified the loans through its own inspection between January and March and had taken disciplinary action, including the dismissal of those involved. However, the bank is being criticized for not reporting the issue until the FSS launched an investigation following public complaints. In response, Woori Bank explained, "This was based on regulations stating that underperforming credit does not necessarily constitute a financial incident." Furthermore, the bank announced it would strengthen procedures for credit review and establish a system allowing employees to report unfair directives internally, regardless of rank.