7 1 Haengbok Bancorp RZ

Overview
In 2009 Haengbok Bancorp became an international bank after opening a new branch in
New York (Merchant & Van der Stede, 2017). The owners felt this would become beneficial
when trying to keep up with worldwide trends (Merchant & Van der Stede, 2017). Their Korean
branch was currently struggling to keep up with the times and felt New York was a great location
to raise capital (Merchant & Van der Stede, 2017). Hyun Ki Kim became the new Senior
Manager at the New York branch (Merchant & Van der Stede, 2017). He hired account managers
to work for the office and expected favorable deals to come from them (Merchant & Van der
Stede, 2017). They were assigned different areas geographically, so there for their clients would
be different (Merchant & Van der Stede, 2017).
Loan Process
1. Locate potential and interested clients.
2. Potential client completes and signs off on credit application.
3. The account manager creates an analysis of the prospect's application against the budget
and policies.
4. Mr. Kim approves or disapproves of loan requests under $1 million.
5. The credit committee determines the approval or disapproval.
6. Corporate has to approve more than $5 million loan requests.
7. After loans were approved, account managers kept constant reviews over their client's
financial activity.
8. Bank examiners and auditors reviewed these accounts as well.
(Merchant & Van der Stede, 2017)
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FETC Loan Application
One of the account managers, Jae Lee, received a loan request from Far East Trading
Corp. (Merchant & Van der Stede, 2017). The loan request is for $11 million in a seven-year
term (Merchant & Van der Stede, 2017). The required paperwork was completed, as well as an
analysis against the budget of the application (Merchant & Van der Stede, 2017). After being
presented to the credit committees and corporate, they decided to reject the loan application
based on allegations against FETC with tax authorities (Merchant & Van der Stede, 2017).
Controls
Each account manager is set up as individual profit centers (Merchant & Van der Stede,
2017). The mini profit centers are a new system used by the bank branch in New York (Merchant
& Van der Stede, 2017). Mr. Kim is displaying a great deal of results controls. His main
intentions are to boost the employee's entrepreneurship (Merchant & Van der Stede, 2017). While
attempting to control the account manager's behavior, Mr. Kim provides performance-based
bonuses. These bonuses are competitive and annually disbursed to the account managers. The
bonus is based on 10% of the aggregate profit while considering the account measures involved
(Merchant & Van der Stede, 2017).
I suggest that the company makes a change to the current company policies to benefit and
back up the current rewards positively. For some account managers, if not all, they may not
receive the full rewards they deserve. I am considering if an account manager cannot approve a
loan request by taking away from their overall bonus. To avoid something like this from
happening, the company should reevaluate their policies with their account managers involved.
In the end, the account managers will not have final approval, but they can have participation in
the financial policies to outcome a positive result control. Also, this can avoid any disagreeing
with the account managers if the loan sale doesn't go as planned.
While keeping in mind that the rewards will increase, I feel the company should keep the
current rewards, and when the time comes to add a different type of bonus to benefit the New
York branch as a whole. Sometimes the loan denials are not the account managers' fault but still
should receive potential rewards for the company’s overall performance. For example, if the
company reaches an x amount of loan sales, each account manager will receive a Christmas
bonus.
Keeping in mind that the competition is further along than Haengbook Bancorp, as long
as the employees are aware of the rules and regulations in place for the loan approvals, there
should be no reason for disagreeing with the employee's and corporate. The time management
that is the most promising aspect to the company, therefore if an employee spends a mass amount
of time on a prospect and is let down, at least they should be aware ahead of time of the reasons
why.
Reference
Merchant, K.A. & Van der Stede, W. A. (2019). Management control systems: Performance
measurement, evaluation, and incentives. (4th Ed.). Upper Saddle River, NJ: Prentice-
Hall.
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Overview

be different (Merchant & Van der Stede, 2017).

1. Locate potential and interested clients.

2. Potential client completes and signs off on credit application.

4. Mr. Kim approves or disapproves of loan requests under $1 million.

5. The credit committee determines the approval or disapproval.

6. Corporate has to approve more than $5 million loan requests.

8. Bank examiners and auditors reviewed these accounts as well.

(Merchant & Van der Stede, 2017)

(Merchant & Van der Stede, 2017).

with the account managers if the loan sale doesn't go as planned.

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