Will the Financial Supervisory Service, Empowered by the "Gabojian Gil," Set a New Milestone?

Personnel Changes for Deputy Director on the 24th
Focus on Handling KIKO and Lime Compensation Cases

[Asia Economy Reporter Kim Hyo-jin] The financial sector's attention is focused on the executive (Deputy Director-General) personnel reshuffle carried out by the Financial Supervisory Service (FSS). This is because it could accelerate fund damage dispute mediation based on estimated loss amounts, as well as the financial companies' voluntary adjustment and compensation for foreign exchange derivative product KIKO damage companies.

This approach is the first attempt by the FSS's Financial Dispute Mediation Office. It is evaluated that FSS Governor Yoon Seok-heon has empowered a 'path not yet taken' in what could be his last executive personnel reshuffle during his term.

Kim Cheol-ung, newly appointed Deputy Governor of the Financial Supervisory Service (left), Jang Seok-il, Expert Review Committee Member

According to the FSS on the 24th, Kim Cheol-ung, newly appointed Deputy Director-General for Consumer Rights Protection yesterday, previously served as head of the Dispute Mediation Division 2, leading the practical work of dispute mediation based on estimated loss amounts for Lime Asset Management fund damages. The FSS is working on establishing practical reference standards for estimating loss amounts in agreement with Woori Bank and KB Securities, who consented to the procedure. Compensation for fund damages is, in principle, possible only after losses are confirmed through redemption or liquidation.

Depending on the results, the FSS expects this method to actively function as a new methodology for future financial dispute mediation. This plan was formalized last month when Governor Yoon accepted Deputy Director-General Kim’s proposal. Kim was inspired by cases where KDB Industrial Bank and some Lime fund investors concluded disputes by agreeing on compensation ratios through mediation (court reconciliation) procedures without confirming losses through full civil litigation.

Kim believes that if such results were derived through court mediation procedures, the FSS, equipped with expertise in the financial sector and vast data, could facilitate smoother and more reasonable agreements. He explained, "Unlike financial companies, financial consumers inevitably endure prolonged suffering through arduous processes such as dispute mediation or litigation. Considering this, the intention is to proactively seek a mutually acceptable agreement point for both parties."

Voluntary adjustment by banks for KIKO damage companies also remains a key task for Deputy Director-General Kim. Banks participating in the consultation body for voluntary adjustment reportedly still resist compensation, citing reasons such as the expiration of the statute of limitations for damage claims under civil law. However, based on some banks’ positive stance, the FSS expects some results by the end of this year or early next year.

Could Become a New Milestone Depending on Results

A financial sector official evaluated, "If the Lime fund dispute mediation and KIKO compensation prove effective, it will set a new milestone." However, the general view is that if they fail, the burden the FSS will have to bear will not be insignificant.

Born in 1966, Deputy Director-General Kim graduated from Jeonra High School and Yonsei University with a degree in Business Administration, and earned an MBA from the University of Maryland, USA. He joined the Bank of Korea in 1991 and has been with the FSS since 2007, serving as a Washington correspondent, Deputy Director of the General Banking Inspection Division, and Director of the General Banking Division.

The FSS also appointed Jang Seok-il, Director of the Accounting Review Division, as a specialized accounting review committee member (Deputy Director-General level). Born in 1966, Jang graduated from Ha-seong Comprehensive High School and Yonsei University with a degree in Business Administration. He joined the FSS in 2000 and has worked as team leader of the Accounting System Office, Deputy Director of the Accounting Investigation Division, Director of the Accounting Management Division, and Director of the Accounting Review Division.