FSS to investigate lenders

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FSS to investigate lenders

Published: 27 Oct. 2014, 05:16

The Financial Supervisory Service (FSS) will begin investigating 10 financial institutions that gave loans to the bankrupt Korean robot vacuum cleaner maker Moneual starting today.

The financial industry is worried about the potential impact of the consequences because Moneual borrowed about 680 billion won ($643 million) from various financial institutions including the Industrial Bank of Korea (IBK) and the Korea Development Bank (KDB).

Of the total, about 386 billion won was issued based on collateral, while the other 290 billion won was approved on the company’s credit.

The FSS will focus on whether the institutions thoroughly evaluated the company’s financial health before lending, and if they took any illegal actions, such as trading cash rebates.

“The FSS will launch an emergency investigation into the 10 banks to find out if they conducted adequate deliberation before approving loans to the company,” said an official at the FSS. “The authority will also look at where the company used the loans and its overall cash flow.”

According to the FSS, as of September the robot vacuum cleaner maker has outstanding loans totaling 676.8 billion won issued by the 10 institutions. IBK lent the company 150.8 billion won, the largest loan, followed by KDB with 125.3 billion won, the Export-Import Bank of Korea with 113.5 billion won and Korea Exchange Bank with 109.8 billion won.

KB Kookmin Bank issued 76 billion won to Moneual. NH Nonghyup Bank lent 75.3 billion won. Standard Chartered and some provincial banks approved a total of about 26.1 billion won to the company.

Woori Bank, Moneual’s main bank until 2012, reported lending the company 85 billion won at the time, but cut the company off saying its excessive credit transactions were dubious.

Korea Trade Insurance Corporation (Ksure) guaranteed about 330 billion won of the company’s exports. Korea Eximbank offered Moneual 247.2 billion won in support after it was chosen as a Hidden Champion business by the bank in 2012.

Controversy over accountability may rise between Ksure and the banks, because they had approved the loans to Moneual based on its export bond receivables, as guaranteed by Ksure.

“The banks say the loans were approved based on Ksure’s export credit guarantee post-shipment,” said the FSS official.

If it turns out the banks entirely relied on Ksure’s documents, the institution should pay back the loans. But the FSS will also be looking into whether there was any lobbying or colluding with the banks.

Moneual filed for court receivership last Monday in Suwon District Court, saying it couldn’t pay its debts. Financial authorities found it suspicious because the company reported revenue of 1.27 trillion won and operating profit of 11 billion won last year.

The Korea Customs Service said Friday it found evidence that Moneual inflated the export value of its products and will ask prosecutors to investigate the issue.

According to the customs authority, Moneual created false documents for exports by colluding with its buyers and issued export bonds which were sold to the banks.

Prosecutors will also launch an investigation this week that will focus on the company’s illegal inflation of its exports value and issuance of bonds.

Founded in 2004 by Chairman Harold Park (Park Hong-seok), Moneual had been credited as a promising small manufacturer. Its products range from robot vacuums to plant watering notifiers and bread machines. It won multiple innovation awards at the world’s largest electronics trade show, CES, and was acclaimed by Microsoft founder Bill Gates as a company to keep an eye on.

Founder Park is a U.S. citizen, and his younger brother, Vice President Park Min-seok is a Canadian citizen.

BY SONG SU-HYUN [ssh@joongang.co.kr]