Lee Bok-hyun "ELS dispute compensation plan within this month... Financial companies' voluntary compensation concurrently 'desirable'"

On the 4th, Lee Bok-hyun, Governor of the Financial Supervisory Service, stated that it is desirable to simultaneously implement official dispute resolution procedures and voluntary compensation by financial companies in response to anticipated consumer damages caused by large-scale losses from Hong Kong H-Share Index (Hang Seng China Enterprises Index) based equity-linked securities (ELS).

Governor Lee appeared on KBS Sunday Diagnosis Live on the same day and said, "If there is any part where we failed to sufficiently control overly formalistic processes in operating systems related to the sale of ELS and others, I apologize to the public," expressing his stance.

He added, "Since losses were expected for ELS as of the end of the year, on-site inspections and fact-finding investigations have been underway this year," and noted, "Cases of inappropriate sales targeting the elderly have been confirmed." He further stated, "After Lunar New Year, a second on-site investigation will be conducted, and by the end of this month, a dispute compensation plan to allocate losses between financial companies and consumers will be finalized."

Governor Lee cited examples of inappropriate sales such as soliciting investments using retirement funds or cancer insurance payouts, or cases where customers were made to subscribe as if the sales were conducted online via mobile phones to avoid mandatory recording of explanations at securities firm counters. He criticized, "There needs to be reflection on whether financial company employees considered consumers as partners growing together or were merely focused on the commissions visible before them."

He also explained, "Based on this, dispute resolution procedures will proceed, and many of the significant facts are acknowledged by banks and financial companies," adding, "Apart from official procedures, it would be desirable to concurrently implement a process where financial companies voluntarily compensate some losses based on inspection results."

Regarding the restructuring of real estate project financing (PF), he said, "It is necessary for financial companies to reflect expected losses from PF defaults in their financial statements," and emphasized, "By accumulating provisions and proceeding with light and public sales, the 'financial bottleneck' should be relieved."

On the investigation into illegal short selling by overseas investment banks (IBs), he stated, "Two cases have been uncovered, two more have been forwarded, and many additional investigations are ongoing," and added, "Investigations are being conducted in close cooperation with the prosecution."

He also mentioned that computerized systems are being developed to the extent that naked short selling becomes impossible, reiterating that the government has no intention to resume it unless definite measures to prevent side effects are established.