Unresolved Hana Bank Disciplinary Hearing... Growing Concerns Over Punishment Severity

It Seems It Will Take Some Time Until the Final Sanction Decision

[Asia Economy Reporter Park Sun-mi] The Financial Supervisory Service (FSS) has yet to determine the level of sanctions against Hana Bank, which caused a large-scale suspension of redemptions in private equity funds. It is expected to take some time before a final decision on the sanctions is made, so uncertainty regarding the disciplinary level for Hana Bank is likely to continue.

According to the financial industry on the 4th, the FSS submitted and reviewed the comprehensive inspection result measures against Hana Bank at the sanctions review committee held on the 2nd, but no conclusion was reached. The FSS stated, "We conducted an in-depth review by thoroughly listening to statements and explanations from company officials and the inspection bureau, carefully examining all facts and evidence, but we were unable to conclude the review," adding, "We plan to resume the meeting later."

The sanctions review for Hana Bank was held for the first time in over four months since July 15, but with no conclusion reached this time, the decision on the level of sanctions will take longer. The FSS has not yet set the date for the third sanctions review for Hana Bank. It is known that the previous review discussed allegations of violations of the Capital Markets Act and incomplete sales practices by the institution and its executives. However, the prolonged dispute between the FSS inspection bureau and Hana Bank appears to have prevented a sanctions decision.

Hana Bank, which had hoped for a reduction in the sanctions level, is once again engulfed in uncertainty over the disciplinary measures. The private equity funds with suspended redemptions at Hana Bank include the Lime Fund with 87.1 billion KRW, the Italy Healthcare Fund with 110 billion KRW, the Germany Heritage Fund with 51 billion KRW, and the Discovery Fund with 24 billion KRW. In July, the FSS issued a 'corporate warning' to Hana Bank for incomplete sales of private equity funds and gave a preliminary 'disciplinary warning' to Ji Sung-kyu, then CEO of Hana Financial Group.

However, since the newly appointed FSS Governor Jeong Eun-bo has shown a more market-friendly stance compared to former Governor Yoon Seok-heon, there was an atmosphere that the FSS’s direction, which had emphasized 'discipline,' might change, potentially lowering the sanctions level against Hana Bank.

Moreover, efforts to compensate victims by sellers of faulty private equity funds have been recognized as grounds for mitigating sanctions. In relation to the private equity fund incident, Woori Bank and Shinhan Bank received decisions that reduced their initially pre-notified sanctions by one level, and the CEO sanctions were also lowered: Woori Financial Group Chairman Sohn Tae-seung’s sanction was reduced from a pre-notified 'suspension of duties' to a 'disciplinary warning,' and Shinhan Bank CEO Jin Ok-dong’s sanction was lowered from a 'disciplinary warning' to a 'cautionary warning.'

The fact that Woori Financial Group Chairman Sohn, who was also warned of heavy sanctions due to internal control deficiencies like Hana Financial Group Vice Chairman Ji Sung-kyu, is continuing legal disputes with the FSS over the cancellation of heavy sanctions is also considered a variable in the decision on Hana Bank’s sanctions level.

With growing interest in the final disciplinary level for Hana Bank, the FSS’s failure to conclude the recent sanctions review means that noise surrounding Hana Bank’s private equity fund incident is expected to continue for the time being.