5 Banks Refuse KIKO Compensation... Only Woori Bank Pays 4.2 Billion Won (Comprehensive Report 2)

[Asia Economy Reporter Kim Min-young] On the 5th, commercial banks, which had been deliberating over the Financial Supervisory Service's (FSS) recommendation for compensation regarding the foreign exchange derivative product KIKO, collectively decided to reject the proposal. As a result, all five banks except Woori Bank refused to pay compensation.

Shinhan Bank held a board meeting on the 5th and announced that it decided not to accept the compensation recommendation for the four companies for which the FSS Dispute Mediation Committee made a mediation decision.

A Shinhan Bank official said, "It was not an easy decision, but after consulting multiple law firms and conducting a long internal review, we concluded that acceptance was difficult," adding, "This decision was ultimately made through the board of directors."

Hana Bank also held a board meeting on the same day and concluded not to accept the FSS Dispute Mediation Committee's compensation recommendation.

A Hana Bank official explained, "Based on a long and in-depth fact-finding and legal review, the board of directors thoroughly discussed and decided to reject the mediation result."

On the same day, Daegu Bank also held an extraordinary board meeting and decided not to accept the KIKO compensation recommendation. A Daegu Bank official explained, "After careful consideration referencing legal opinions from law firms, we decided not to accept the FSS's KIKO compensation recommendation." They also noted that they took into account the fact that the recovery claims of the relevant trading companies were converted to equity and canceled without consideration twice.

However, these banks plan to review the facts and discuss appropriate response measures through participation in the bank council for additional companies recommended by the FSS for voluntary mediation among the remaining companies related to KIKO that have not yet received court rulings.

They have been reviewing the FSS's KIKO compensation recommendation but have not reached a conclusion for six months. The period to notify acceptance was extended five times. A bank official said, "Outside directors were concerned about 'breach of fiduciary duty,' making it difficult to accept the recommendation." There was concern that shareholders might raise breach of fiduciary duty issues if compensation was paid for matters already decided by the Supreme Court.

Previously, for similar reasons, KDB Industrial Bank and Korea Citibank decided not to accept the recommendation, and only Woori Bank paid the compensation amount of 4.2 billion KRW recommended by the FSS in February.

The FSS Dispute Mediation Committee found Shinhan, Woori, Industrial, Hana, Daegu, and Citibank responsible for incomplete sales and recommended compensation of 15-41% of losses to four companies: Ilseong Highsco, Namhwa Trading, One Global Media, and Jaeyoung Solutek. The compensation amounts are 15 billion KRW for Shinhan Bank, 4.2 billion KRW for Woori Bank, 2.8 billion KRW for Industrial Bank, 1.8 billion KRW for Hana Bank, 1.1 billion KRW for Daegu Bank, and 600 million KRW for Citibank, respectively.