[2020 National Audit] Yoon Seok-heon: "KIKO Incident Involves KDB's Mis-selling"

[Asia Economy Reporter Park Sun-mi] Yoon Seok-heon, Governor of the Financial Supervisory Service, expressed the view that the Industrial Bank of Korea's actions related to KIKO (currency option contracts) constitute a violation of regulations and incomplete sales.

On the 23rd, during the National Assembly's Financial Services Committee comprehensive audit, Governor Yoon stated that the Industrial Bank of Korea violated regulations by failing to provide KIKO option price information, which corresponds to incomplete sales. He added, "It is desirable for the Industrial Bank of Korea to accept the recommendation of the Dispute Mediation Committee." However, he also said, "Since the decision of the Dispute Mediation Committee is a recommendation, it is difficult to comment specifically on it."

Previously, the Financial Supervisory Service's Dispute Mediation Committee proposed a mediation plan requiring six banks, including the Industrial Bank of Korea, to compensate four KIKO-affected companies for 15-41% of their losses, but the Industrial Bank of Korea refused to accept the mediation plan.

Lee Dong-geol, Chairman of the Industrial Bank of Korea, stated that regarding the KIKO incident, there is no charge of incomplete sales, and therefore it is difficult to accept the compensation recommendation regardless of the breach of trust issue. The Industrial Bank of Korea acknowledged the problem of not providing KIKO option price information and explained that corrective measures were later completed, but some KIKO-affected companies claim they never received related price information from the Industrial Bank of Korea.

The KIKO incident occurred during the 2008 global financial crisis when exchange rates soared, causing export companies that had heavily subscribed to the derivative financial product KIKO to suffer massive damages and go bankrupt one after another. The affected companies pointed out the unfairness of the KIKO product and filed lawsuits against the banks that sold it.