FSS Unable to Reach Conclusion on Woori Bank Disciplinary Hearing Attended by 'Sobocheo'

Woori Bank's Sanctions Review Prolonged, Shinhan Bank's Sanctions Review Yet to Start
Financial Supervisory Service Proposes Mitigation, Expected to Be Reflected

[Asia Economy Reporter Wondara] The Financial Supervisory Service (FSS) held a disciplinary committee meeting regarding Woori Bank but failed to reach a conclusion. Initially, there was keen interest in the financial sector on whether the presence of the Financial Consumer Protection Department (FCPD) at the Woori Bank disciplinary hearing would lead to a reduction in the severity of sanctions.

The FSS announced via text message at 10:30 PM on the 25th, immediately after the conclusion of the 7th disciplinary committee meeting, that "the deliberation proceeded after thoroughly listening to statements and explanations from multiple company representatives and the Inspection Bureau, and the meeting will resume on March 18."

The FSS conducted the disciplinary hearing for Woori Bank starting at 2 PM that day. Although a disciplinary hearing for Shinhan Bank was scheduled to begin at 6:30 PM, the agenda for Woori Bank extended, and the Shinhan Bank agenda ended without even starting.

The extended duration of the Woori Bank disciplinary meeting is believed to be due to the FCPD’s proposal for mitigation. The FCPD reportedly evaluated that Woori Bank made sufficient efforts to compensate and resolve damages following the Lime incident. Some in the financial sector speculated that Woori Bank could become the first case to receive reduced sanctions due to consumer protection efforts.

Woori Bank accepted the FSS’s dispute mediation proposal to refund 100% of the principal to investors in the Lime Trade Finance Fund (Pluto TF-1). On the 23rd, in the first dispute mediation committee related to the Lime incident in the banking sector, Woori Bank was notified to provide a basic compensation rate of 55%, which is 5 percentage points higher than Industrial Bank of Korea, and up to 78% compensation.

On the other hand, the FCPD is reported not to attend the disciplinary hearing for Shinhan Bank. It is understood that the FCPD judged that liquidity supply through advance payments alone does not sufficiently demonstrate consumer protection efforts. Shinhan Bank decided in June last year to provide a 50% advance payment of the principal to investors in the Lime Credit Insured (CI) Fund. This method involves initially giving half of the subscription amount to victims and later adjusting the compensation ratio based on the FSS dispute mediation committee’s decision.

There is speculation in the financial sector that at least two to three additional disciplinary hearings may be held. The decisions of the disciplinary committee serve as advisory opinions to the FSS Governor. The final level of disciplinary action is confirmed through the FSS Governor’s approval or review by the Securities and Futures Commission and resolution by the Financial Services Commission.

Previously, the FSS pre-notified Son Tae-seung, then chairman of Woori Bank at the time of Lime fund sales, of a ‘suspension from duty’ (equivalent), and Jin Ok-dong, the bank president, of a ‘reprimand warning.’ Cho Yong-byeong, chairman of Shinhan Financial Group, was pre-notified of a minor disciplinary action, a ‘cautionary warning.’ The disciplinary levels for financial company executives are divided into five stages: ▲recommendation for dismissal ▲suspension from duty ▲reprimand warning ▲cautionary warning ▲caution. Among these, reprimand warning and above are considered serious disciplinary actions. If the sanctions are confirmed as is, reemployment in the financial sector will be prohibited for 3 to 5 years after the current term ends.