The nation’s top financial regulator on Wednesday slapped seven banks with fines of up to 50 million won ($42,000) each for making borrowers purchase financial products to have their loan applications approved.

The seven banks were found to have sold financial products such as deposits and insurances worth 33 billion won in exchange for issuing loans between Sept. 26, 2009 and June 30, 2011, the Financial Supervisory Service said.

“The banks failed to establish or run internal control systems to prevent such irregular practices and were negligent in self-supervision,” the FSS said in a statement.

The FSS imposed fines of 50 million won each on the Industrial Bank of Korea and Nonghyup Bank, 37.5 million won on Standard Chartered Bank Korea, 25 million won each on Busan Bank, the National Federation of Fisheries Cooperatives, Citibank Korea and Shinhan Bank.

The regulator reprimanded or issued warnings against seven executives at five banks, and called on the bank chiefs to take punitive measures on 695 employees at seven banks.

The FSS said it will guide the banks to establish and operate systems that prevent deposit contracts linked with loan issuances, and tighten constant monitoring and inspections to protect consumers from irregular sales practices.

The regulator also said it plans to raise the level of sanctions on banks and their staff in future cases of unfair sales practices.

By Kim So-hyun (sophie@heraldcorp.com)