FSS fines NH Nonghyup for too-low interest rate

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FSS fines NH Nonghyup for too-low interest rate

NH Nonghyup Bank was found to have extended more than 6 trillion won ($5.4 billion) in loans to its only shareholder at unreasonably low interest rates, the country’s financial regulator confirmed yesterday.

“We conducted a general inspection into NH Nonghyup Bank from June 1 to July 13 and found some problems,” said an official from the Financial Supervisory Service.

Among them is NH Nonghyup Bank giving loans to the National Agricultural Cooperative Federation, which owns 100 percent of the bank’s shares, at low interest rates.

In March 2012, the bank offered 6.3 trillion won in public funding loans to the cooperative federation at interest rates given to public institutions, which tend to be lower than normal rates.

According to the FSS, of the 6.3 trillion won in loans, 2.3 trillion won was extended and paid back on the same day at an interest rate of 1.75 percent, while a 4.05 trillion won one-year loan was given at 5.27 percent interest.

While there is no difference in the interest rate extended to either public or private institutions for daily loans, the 5.27 percent interest rate on the annual loan should have been 5.79 percent, the FSS report showed.

“We issued a warning to NH Nonghyup Bank and imposed a 25 million won penalty,” said the FSS official.

The unfair lending activity by the bank is again putting the spotlight on the controversy involving the agricultural group and its bank.

There have been concerns raised over structural problems.

The financial division of the agricultural cooperative Nonghyup spun off from other businesses like retail and distribution under the name Nonghyup Financial Group last year.The goal was to maximize the abilities of its retail sector and financial businesses.There has been speculation that officials at the financial group and the agricultural cooperative don’t get along and that the agricultural cooperative chairman retains significant control over the financial group.

BY LEE EUN-JOO [angie@joongang.co.kr]
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