Industrial Bank of Korea to abide by dispute mediation procedure over fund fiasco

Industrial Bank of Korea (IBK) CEO Yoon Jong-won speaks during a conference at its headquarters in Seoul on Feb. 5. Yonhap

By Lee Min-hyung

Industrial Bank of Korea (IBK) CEO Yoon Jong-won pledged Thursday to abide by an upcoming dispute mediation procedure to compensate customers who lost money from soured investments, in funds involving Discovery Asset Management.

The lender sold 361.2 billion won ($325.8 million) worth of investment products linked to the funds for three years since 2017, but failed to return 69.5 billion won of the money to customers seeking redemptions.

The IBK chief said the bank will compensate victims' losses in line with guidelines set up by the Financial Supervisory Service (FSS). The regulator plans to convene the dispute settlement committee soon.

"It is reasonable for us to compensate for their losses through relevant processes taken by the committee," Yoon said in a press conference. "We are going to do our best to minimize customers' damages by sincerely cooperating with any request from the committee."

The IBK head also pledged to place top priority on protecting customers, so that the lender will not be shaken by another scandal involving soured funds. Former IBK CEO Kim Do-jin was recently slapped with a sanction for his poor management, regarding sales of risky funds linked to Lime Asset Management and Discovery Asset Management.

Yoon also did not rule out the possibility of the lender adopting a union-recommended non-executive board member. All eyes are on whether the IBK will set an example by embracing union demands, which will be unprecedented.

"The introduction of the union-recommended board system comes with expectations and concerns, but it can be realized only after the relevant laws are revised," Yoon said. "We hope to build a culture of cooperation between labor and management."

Under the much-controversial drive, the union urges the lender to fill the position with at least one person recommended by the union after two of the lender's outside board members finish their terms in February and March, respectively.

Yoon took office as the leader of the state-run bank in January 2020, amid fierce opposition from the union. At that time, he promised to introduce the union-recommended board system.

Korea's major commercial lenders do not welcome the introduction of the system, as top management of most companies ― including banks ― believe the system will end up adding confusion to what they call the "consistent operation" of the board. They also believe that the union-recommended board members may push for policies that could go against the overall interests of the shareholders in some ways.

Yoon also shared his plan to continue focusing on helping the self-employed, as well as small- and medium-sized enterprises suffering from the aftermath of the coronavirus shock, even throughout 2021, despite the lender's falling revenues.

IBK reported a net profit of 1.54 trillion won in 2020, down 4.1 percent from the previous year. The lender's earnings have declined since 2018 when it posted 1.76 trillion won in annual net profit.

The earnings drop was attributable to a fall in net income margin and preemptive steps by the bank to set aside more reserves to cushion the 340.6 billion won in bad debts last year amid the unexpected outbreak and spread of the coronavirus.

"Given the allowance, we consider the 2020 earnings performance to be decent enough," he said.

Site Map E-paper Subscribe Register LogIn
Site Map E-paper Subscribe Register LogIn