Korean bank branches in China suffer from heavy fines

Woori Bank China’s branch in Shenzhen, China [Courtesy of Woori Bank]

Korean banks operating in China suffered from intensive investigations and fines imposed by local financial authorities last year, data showed on Wednesday.

According to the electronic disclosure of the Financial Supervisory Service, China’s financial authorities imposed a combined fine of 17.43 million yuan ($2.43 million) on branches in China of Woori Bank, Hana Bank and state-run Industrial Bank of Korea last year.

In April last year, China’s State Administration of Foreign Exchange notified Woori Bank China of a fine of 200,000 yuan for errors in its international payment balance report and statistical report. Furthermore, in June last year, the National Financial Regulatory Administration in Beijing imposed a fine of 900,000 yuan on the bank for insufficient reviews of personal business loans and negligence in handling foreign currency payment guarantees.

In September, the Guangdong branch of China’s State Administration of Foreign Exchange imposed a fine of 15.76 million yuan on Hana Bank China for insufficient foreign currency payment guarantees. It was the largest single case of fines imposed on Hana Bank by overseas financial regulators since the merger with Korea Exchange Bank.

Moreover, in December, the Suzhou branch of Industrial Bank China was fined 570,000 yuan by the local foreign exchange watchdog for omission of external reports and insufficient confirmation of remittance data.

Intensive sanctions by Chinese financial authorities were not limited to last year. In July 2021, the People’s Bank of China imposed a fine of 1.98 million yuan on Woori Bank China for failing to comply with customer identification obligations. The former head of Woori Bank China was also fined 41,000 yuan separately.

Hana Bank China also received a fine of 3.5 million yuan and corrective action from the National Financial Regulatory Administration in Beijing due to lack of internal control related to business loans in December 2021.

What is at issue is that this move by China came as Korean banks operating in China were having difficulties as loan delinquency rates increased due to the slump in the real estate market in China, undermining Korean banks’ positions in the country.

“China’s financial market is basically not open, so there are limits to the growth of foreign financial companies, including, Korean firms, due to severe checks by financial authorities there,” said a bank official.

As of 2019, the number of branches of Korean financial companies in China stood at 59, including 16 banks, surpassing the number of U.S. banks in China at 54. At the end of 2021, assets of Korean banks in China reached $32.36 billion, accounting for 17.7 percent of total overseas bank branch assets.

Meanwhile, the Seoul branch of the People’s Bank of China was the only one sanctioned by Korean financial authorities last year among Chinese financial companies in Korea. The Financial Supervisory Service issued a warning to one employee at the bank for violating the obligation to report a large volume of cash transactions in June last year.