"Financial Services Commission Allowing Illegal Bank Appraisals"... Official Protest by Appraisers Association

"Agreement Reached" at the National Assembly,
But Issue Left Unaddressed

Appraisers Association Officially Protests "Breach of Principles"

The Korea Association of Real Estate Appraisers has officially protested to the Financial Services Commission for allowing banks to engage in illegal internal appraisal activities.

On the 15th, the association announced that it had sent an official document to the Financial Services Commission, demanding corrective action on banks' illegal internal appraisals and a formal response to its inquiry. This comes nine months after the association and the commission reached an agreement in October of last year to improve banks' methods for assessing collateral value in line with the intent of the Appraisal Act.

Financial Services Commission nameplate. Korea Association of Real Estate Appraisers

Previously, on October 22 of last year, the association and the vice chairman of the Financial Services Commission agreed on "principles for improving banks' internal methods for assessing collateral value" and submitted this in writing to the National Assembly. On October 27, Lee Eogwon, chairman of the Financial Services Commission, responded at a meeting of the National Assembly's Political Affairs Committee, stating, "Although the issue of financial institutions' internal appraisals has been raised at the annual parliamentary audits since 2022, the Financial Services Commission has delayed action under the pretext of a task force." He went on, "The vice chairman of the Financial Services Commission and the chairman of the Korea Association of Real Estate Appraisers recently met and reached a basic agreement to improve the assessment methods," in response to a comment from Kim Yongman, a lawmaker from the Democratic Party of Korea.

Subsequently, the association, the Financial Services Commission, the four major commercial banks, and the Korea Federation of Banks held two joint meetings and continued discussions until February of this year. However, since the conclusion of those meetings, the Financial Services Commission has not taken any follow-up actions, such as administrative guidance, to develop improvement measures.

Current appraisal law stipulates that if financial institutions wish to conduct appraisals of land or other property for loans or similar purposes, they must commission an independent external appraisal corporation. The Ministry of Land, Infrastructure and Transport—which oversees the Appraisal Act—also issued an authoritative interpretation in September of last year, clarifying that it is illegal for banks to employ appraisers directly to conduct internal evaluations of collateral.

The association argues that, by presenting a compromise plan that only partially reduces internal appraisals instead of demanding their complete cessation, the Financial Services Commission is in effect condoning these illegal practices. The commission's compromise involves reducing, by 2030, the proportion of banks' internal appraisals conducted through employed appraisers to half the current level.

In its official letter, the association requested the Financial Services Commission explain why it has not taken any measures—such as administrative guidance—to resolve these illegal practices, and to clarify whether it has examined the current status of internal appraisals conducted by commercial banks.

The association stated, "A compromise that allows for potential violations against the government's authoritative interpretation cannot be accepted," adding, "The Financial Services Commission should not avoid addressing this issue and must eliminate these illegal practices in accordance with the law."

This content was produced with the assistance of AI translation services.