Task force planned to curb hard selling

By Kang Seung-woo

Staff Reporter

The Financial Supervisory Service (FSS) said Sunday that it will form a taskforce to introduce a guideline on the sale of financial products in a move to ban local banks from forcing borrowers to buy unwanted products in return for receiving loans.

In a related move, the financial watchdog also sent a document to local banks instructing them to reform their sales practices in order to root out unfair sales activities, known as ``hard selling.''

Hard selling is where banks allow loans to their clients ― corporate and individuals ― on the condition that they buy or subscribe to a variety of financial products.

The move comes as the number of illegal activities has increased in the implementation of an excessive result-oriented business policy by a few banks, so it asked them to revise their Key Performance Indicators (KPI) system to curb the side-effects.

``There are many occasions that banks force clients to sign unwanted contracts, such as for retirement funds, savings, and insurance, taking advantage of their superior position,'' the FSS said.

The financial watchdog also asked banks to count out results from branches which forced hard selling or reported an inflated a record.

Along with the regulation, the FSS ordered banks to fortify enhancing self-control systems to keep in check financial mishaps often caused by result-obsessed business customs and computerized systems to curb uneven sales.

It plans to focus on scrutinizing unsound business activities based on performance-driven sales.

``Excessive performance-oriented operation is likely to damage banks' soundness and endanger the financial system, as we witnessed in the Lehman Brothers' bankruptcy,'' an FSS high-ranking official said.

``The joint efforts by all banks are required to bear fruits.''

Ahead of the financial regulator's guideline, the National Assembly-level efforts began to annihilate hard selling.

The National Policy Committee at the National Assembly passed a bill on the revised banking sector relegations late last month and it is waiting to be legislated.

According to the bill, which will go into effect as early as October, a bank will be fined up to 50 million won ($44,000) and an employee up to 10 million won if they have violated the restrictions.