Major Banks to Hold Temporary Board Meetings This Week
Victim Groups to Hold 4th Rally in Front of KB Kookmin Bank, the Largest Seller, on the 29th
Major banks will finalize voluntary compensation this week related to the large-scale loss incident involving Hong Kong H Index (Hang Seng China Enterprises Index·HSCEI)-based equity-linked securities (ELS). However, the ELS victims' group refuses to accept the voluntary compensation guidelines proposed by the regulatory authorities and continues to hold rallies demanding full compensation, indicating that a standoff is likely to persist for some time.
According to the financial sector on the 27th, KB Kookmin, Shinhan, Hana, NH Nonghyup, and SC First Bank will hold extraordinary board meetings this week to finalize the voluntary compensation plan related to Hong Kong H Index-based ELS. Hana Bank's meeting is scheduled for the 27th, NH Nonghyup and SC First Bank on the 28th, and KB Kookmin and Shinhan Bank on the 29th.
Prior to this, each bank explained the compensation plan related to Hong Kong H Index-based ELS during meetings with outside directors. At the extraordinary board meetings to be held this week, they plan to report the estimated compensation amount calculated through simulations based on the dispute resolution standards announced by the Financial Supervisory Service on the 11th, and discuss agenda items to reflect this in their financial results.
The scale of compensation is expected to reach trillions of won. With about 10 trillion won worth of Hong Kong H Index-based ELS maturing in the first half of the year, assuming a 50% loss rate and an average compensation ratio of 40%, the compensation amount would reach approximately 2 trillion won. The regulatory authorities have also anticipated that the compensation range for most cases will be between 20% and 60%, and banks are reportedly considering compensation ratios in the 20% to 40% range.
Accordingly, KB Kookmin Bank, the largest seller of Hong Kong H Index-based ELS, is expected to bear compensation close to 1 trillion won, about half of the total. Earlier, Woori Bank, the first among major banks to finalize voluntary compensation, had a sales amount of about 41.5 billion won for the ELS subject to adjustment, with compensation estimated at around 10 billion won.
Once the boards of directors of each bank approve such voluntary compensation plans, the banks will individually contact investors whose losses have been confirmed starting in April to begin the adjustment process. The Financial Supervisory Service will also select representative cases and refer them to the Dispute Mediation Committee to provide guidelines.
However, if no agreement is reached between the sellers and consumers, individual dispute mediation and legal litigation will follow. Immediately, ELS consumer groups are opposing the current voluntary compensation plan and demanding full compensation. The Hong Kong ELS victims' group plans to hold the 4th rally on the 29th in front of KB Kookmin Bank's headquarters in Yeouido, Seoul, claiming "nullification of contracts due to nationwide financial fraud."
A financial sector official said, "Looking at precedents such as the previous overseas interest rate-linked derivative-linked fund (DLF) incident, sellers often have the advantage if the case goes to litigation," adding, "Since the introduction of the Financial Consumer Protection Act (FCPA), banks have also established various protective measures, so it will not be easy for individual consumers to prove incomplete sales."
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