CEOs of Shinhan, Woori, Hana in hot seat over sales of defective financial products
From left are Woori Financial Group Chairman Son Tae-seung, Hana Bank CEO Ji Sung-kyoo and Shinhan Bank CEO Jin Ok-dong. Yonhap
By Lee Min-hyung
Leaders of the nation's major financial groups are in the hot seat with regulators planning to sanction them for poor management in their selling of defective financial products last year.
The Financial Supervisory Service (FSS) recently notified former Industrial Bank of Korea (IBK) CEO Kim Do-jin of heavy sanctions for his failure to properly supervise the sale of troubled funds linked to Lime Asset Management and Discovery Asset Management.
The FSS will hold a sanctions committee meeting Thursday to make a final decision on whether to take severe disciplinary action against Kim.
Financial executives who are reprimanded or receive a warning from regulators are not allowed to work at other financial firms for between three and five years.
The heads of Korea's banking industry are watching closely as the FSS plans to hold similar committee meetings soon to decide on the level of punishment for most commercial banks here ― including Shinhan, Woori and Hana ― which were also engaged in selling the troubled funds.
The FSS was scheduled to hold the sanctions committee meetings on the commercial lenders last year, but these were postponed due to the COVID-19 pandemic. The FSS will decide on the level of sanctions for the leaders of the banks by the end of March.
They are Woori Financial Group Chairman Son Tae-seung, Hana Financial Group Vice Chairman Ham Young-joo, Hana Bank CEO Ji Sung-kyoo and Shinhan Bank CEO Jin Ok-dong.
The banks are watching closely whether any of the incumbent leaders end up being slapped with heavy sanctions, which they fear could create leadership vacuums.
Woori Bank sold 357.7 billion won worth of Lime funds, while Shinhan sold 276.9 billion won of the products.
“We will comply with any requests from authorities before the committee takes place,” a banking industry source said.
Lenders are widely expected to file administrative litigation against the regulator's decision if their leaders are slapped with tough sanctions.
Last year, Woori Bank filed a lawsuit against the FSS decision on Son after he received a disciplinary action over the sale of so-called derivatives-linked fund (DLF) products. Hana Bank also took similar action for its vice chairman. The court sided with the banks and suspended the decisions of the regulator.
The lenders are two of the banks hit hardest by the sales of the DLF options in 2020. Citing problems caused by the funds, the FSC also banned the banks from selling private equity fund products for six months in March last year.
“Given the previous cases, the banks will inevitably file a lawsuit against any possible sanctions by the regulator,” the official said.
According to FSS data, the regulator received requests for dispute settlement over risky funds from 13 private equity firms last year. Banks were a major sales channel of the products.