Financial Supervisory Service Notifies Woori Financial Group of Management Evaluation This Week

Downgrade from Level 2 to Level 3
FSC to Review M&A Starting Next Week

The Financial Supervisory Service (FSS) has decided to notify Woori Financial Group of its management evaluation rating within this week. The rating is expected to be downgraded from the current level 2 to level 3. The Financial Services Commission (FSC) will make the final decision on Woori Financial Group's acquisition of Dongyang Life Insurance and ABL Life Insurance after receiving the rating. A conclusion is anticipated as early as early May.

On the morning of the 17th, the FSS stated in a press release, "The current management evaluation rating for Woori Financial Group has not yet been notified to Woori Financial Group," and added, "It is scheduled to be notified to Woori Financial Group within this week."

The downgrade factors include poor internal controls and failures in risk management. Woori Financial Group underwent on-demand inspections due to improper loans related to the former chairman, and a large-scale non-performing loan was detected during last year's regular inspection.

The management evaluation of financial holding companies is broadly classified into three areas: risk management (40%), financial condition (30%), and potential shocks (30%). The FSS has significantly increased the weight of risk management scores, including internal controls, compared to before. It is reported that Woori Financial Group's scores have declined in the risk management area, which deals with internal controls, and the potential shocks area, which deals with subsidiary management.

The acquisition of insurance companies by Woori Financial Group will be decided based on this management evaluation. According to the Financial Holding Company Supervision Regulations, if the management evaluation result is level 3 or below, difficulties arise in acquiring subsidiaries.

However, the final approval is determined by the FSC. If Woori Financial Group is judged to have met certain requirements through efforts such as increasing capital or disposing of non-performing assets, the acquisition may be permitted. The FSC has stated that after receiving the rating, it will review for at least one month before making a conclusion. If conditional approval is granted, additional documents may be requested depending on the situation. Considering this, the FSC is expected to make the final decision on Woori Financial Group's insurance company acquisition by May.

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