Photo courtesy of Yonhap News

 

 

[Alpha Biz= Paul Lee] Welcome Savings Bank has been hit by a large-scale fraud involving auto parts receivables-backed loans, with estimated losses nearing KRW 90 billion (about $70 million).

According to financial authorities and industry sources on the 29th, the bank identified the incident late last year and voluntarily reported it to the Financial Supervisory Service.

The fraud is believed to have involved import auto parts suppliers that secured loans by submitting repair cost estimates through the Insurance Development Institute’s AOS system. Savings banks typically extend short-term securitized loans based on such receivables, which are repaid when insurers settle repair costs.

However, some suppliers allegedly set up special purpose companies (SPCs) and fabricated estimates to obtain fraudulent loans.

Welcome Savings Bank is said to have extended about KRW 300 billion in such loans over several years, mainly to parts suppliers and repair shops. Due to the short-term nature of these loans, around KRW 200 billion has already been recovered, leaving approximately KRW 90 billion at risk. The bank has reportedly set aside full provisions against the remaining exposure.

The bank halted all related lending immediately after detecting the issue and has requested a police investigation while initiating asset seizure procedures against the suspected firms.

The Financial Supervisory Service has conducted an on-site inspection and is expanding its review to determine whether similar cases exist across other savings banks.

 

 

 

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