The Securities and Futures Commission to Hold First DLF Sanctions Review on the 12th... Which Side Will the Financial Services Commission Take?

Eun Sung-soo, Chairman of the Financial Services Commission, is delivering opening remarks at the 'Foreign Financial Companies Representatives Meeting' held on the 10th at the Conrad Hotel in Yeouido, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Jo Gang-wook] The Securities and Futures Commission under the Financial Services Commission will hold its first review on the 12th regarding institutional sanctions on Woori Bank and Hana Bank related to overseas interest rate-linked derivative-linked funds (DLF). Amid recent conflicts between the Financial Supervisory Service and Woori Financial Group over the decision for severe disciplinary actions, the financial sector is focusing its attention on which side the Financial Services Commission will support.

According to the financial sector and financial authorities on the 11th, institutional sanctions against Woori Bank and Hana Bank related to DLF are expected to be submitted for review by the Securities and Futures Commission.

In the case of sanctions related to DLF, disciplinary actions against the CEO are finalized with the approval of the head of the Financial Supervisory Service, but institutional sanctions such as partial suspension of operations and fines require a resolution by the Financial Services Commission. Regular meetings of the Securities and Futures Commission and the Financial Services Commission are held biweekly on Wednesdays. Typically, the procedure involves review by the Securities and Futures Commission followed by a resolution at the Financial Services Commission’s regular meeting.

In particular, the timing of the Financial Services Commission’s decision and notification is the biggest point of interest as Sohn Tae-seung, chairman of Woori Financial Group, has expressed his intention to file an administrative lawsuit against the Financial Supervisory Service’s severe disciplinary decision. The disciplinary effect takes place once institutional sanctions are finally decided and notified at the Securities and Futures Commission under the Financial Services Commission and the full meeting of the Financial Services Commission. In other words, if institutional sanctions are finalized at the Securities and Futures Commission and the full meeting of the Financial Services Commission in February before the shareholders’ meeting, the sanctions will take effect before the meeting, putting a red light on reappointment.

Moreover, the fact that Chairman Sohn has recently strongly expressed his intention to be reappointed and that the Woori Financial board has also expressed support for this has complicated the Financial Supervisory Service’s stance, which is another reason why the financial sector is closely watching the Financial Services Commission’s decision. Amid the confrontation between the Financial Supervisory Service and Woori Financial, criticism is even being raised that the higher authority, the Financial Services Commission, is not showing its presence.

Regarding this, Eun Sung-soo, chairman of the Financial Services Commission, told reporters after a luncheon meeting with CEOs of foreign financial companies held at the Conrad Hotel in Yeouido, Seoul, the day before, "If the institutional sanctions part is transferred to the Financial Services Commission, we will do our work within the given time to avoid misunderstandings as much as possible."

The Financial Services Commission expects the procedures, including review by the Securities and Futures Commission, the Financial Services Commission agenda review subcommittee, and prior notification to the parties involved, to be completed as early as the beginning of next month.