Lee Bok-hyun "No Lump-Sum Compensation for Hong Kong ELS... Compensation Criteria to Be Announced on the 11th"

Based on Dozens of Factors Including Age Group and Investment Experience
"100% Compensation Possible, Differential Compensation Principle Depending on the Case"

Photo by Yonhap News

Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), drew a line against blanket compensation regarding the large-scale loss incident involving Hong Kong H Index-based equity-linked securities (ELS), stating that the compensation ratio could be differentiated from 0% to 100%. Regarding the timing of the announcement of the responsibility-sharing criteria for the ELS incident, he said, "Based on dozens of factors such as age group and investment experience, reflected in a matrix, we expect it to be on the 11th."

On the 5th, Lee Bok-hyun appeared on CBS Radio's 'Kim Hyun-jung's News Show' and said about the Hong Kong ELS incident, "We are currently organizing elements such as whether consumers should bear more responsibility, or bear all responsibility, or in some cases whether banks or securities firms should be responsible."

The Hong Kong ELS incident occurred as the H Index, composed of blue-chip stocks in Hong Kong, fell. If the H Index does not fall below the baseline, the return is higher than bank interest. Banks promoted linked ELS products with the explanation that the H Index would not fall as long as Hong Kong did not default. However, the Hong Kong H Index fell. Since these are maturity products, investors cannot wait for recovery. The investment amount is known to be 19 trillion won, and there is a loud outcry from those whose principal has been halved.

Governor Lee said, "The H Index is closely related to factors such as the Chinese real estate market, so we have been continuously monitoring the situation since at least mid-last year," adding, "In fact, maturities start this year, but the likelihood of realization has been high since October and November of last year, so inspections and on-site investigations have been conducted since then."

He continued, "According to the principle of suitability, recommending products suitable for customers is both an obligation and a principle." While 100% compensation is possible because there is a possibility of cancellation of the legal act itself, the FSS governor explained that differentiated compensation according to cases is the principle.

Meanwhile, due to the Hong Kong ELS incident, the issuance volume of ELS last month sharply decreased to about half compared to the previous month. According to the Korea Securities Depository, the issuance amount of ELS from the 1st to the 28th of last month was recorded at 885.1 billion won. This is a 47% decrease compared to 1.6667 trillion won last month and a 60% decrease compared to the same period last year (2.0202 trillion won).