The financial watchdog said Monday it has issued a disciplinary warning to three lenders -- Shinhan, Hana and Industrial Bank of Korea -- for their slack management in project financing.

Project financing refers to a long-term loans issued by savings banks and other lending institutions as well as a number of equity investors, which is aimed at supporting infrastructure projects. 

The Financial Supervisory Service slapped disciplinary measures against the lenders as they reportedly subtracted some of the remaining amount of their borrowers’ loan balance that had not been used up to collect interest. 

“To prevent interest burden on borrowers, the bank officials must carry out a consultation process, giving enough options to their customers regarding loan conditions, including different types of provident fund loans as well as methods of interest payments,” said an official at the FSS’ mutual savings bank examination department. 

A disciplinary warning is a low-level sanction imposed by the FSS to lead domestic financial firms to improve their lax handling in businesses. The reprimanded financial institutions are obliged to report their corrective actions within six months of the FSS’ penalty. 

Meanwhile, the financial watchdog plans to launch a comprehensive audit as early as August, but in a smaller scale compared with the planned scheme owing to the coronavirus outbreak, industry sources said. 

The authority had previously decided to investigate a total of 17 financial companies across industries, including local lenders, banking groups, brokerage houses, management firms and life insurers. To prevent the spread of the COVID-19, the FSS is slated to select only 12 companies and make audit preparations this month. 

The FSS has announced the audit will first target two major commercial banks -- Woori and Hana -- along with Kyobo Life Insurance. The final list of companies subject to the inspection has yet to be confirmed, officials said. 

By Choi Jae-hee (cjh@heraldcorp.com)