'ELS Compensation Turning Point' Major Banks Jointly Resolve 'Voluntary Compensation'... Dedicated Team Established

All Commercial Banks to Promote 'Voluntary Compensation' After KB and Shinhan's Board Meeting on 29th
Voluntary Adjustment Council with External Experts and Internal Support Organizations Activated and Established
First Voluntary Compensation Case at Hana Bank
FSS Plans April Subcommittee Meeting and Sanctions Procedures for Sellers

Woori Bank, the first to decide on voluntary compensation for Hong Kong H-Index (Hang Seng China Enterprises Index·HSCEI) equity-linked securities (ELS), is being followed by NH Nonghyup Securities, SC First Bank, Shinhan Bank, and KB Kookmin Bank. Major commercial banks have all expressed their intention to accept the dispute resolution standards previously announced by the Financial Supervisory Service (FSS), and they plan to launch full-scale voluntary compensation procedures centered on dedicated internal teams and external expert groups. Hana Bank has already conducted the first voluntary compensation for ELS loss customers.

According to the financial sector on the 30th, after KB Kookmin Bank held its temporary board meeting yesterday, the last among major commercial banks including Woori Bank, Hana Bank, NH Nonghyup Bank, SC First Bank, and Shinhan Bank, they have concluded their decisions on voluntary compensation for Hong Kong ELS and are entering the compensation procedures. It has been only a week since Woori Bank held its first board meeting on the 22nd to resolve voluntary compensation, and major commercial banks hurriedly held temporary board meetings to officially express their participation.

Until now, the banking sector's attention was focused on what decisions Woori Bank and KB Kookmin Bank would make. Woori Bank had the least voluntary compensation burden by proactively limiting ELS sales channels, whereas KB Kookmin Bank had the largest compensation burden because it actively continued selling Hong Kong ELS until last year. The scale of Hong Kong ELS sales is largest at KB Kookmin Bank with 7.8 trillion KRW, followed by Shinhan Bank and NH Nonghyup Bank with 2.4 trillion KRW and 2.2 trillion KRW respectively. Hana Bank follows with 1.4 trillion KRW, and SC First Bank with 1.2 trillion KRW. Woori Bank has the smallest amount at around 40 billion KRW. With the FSS's dispute resolution committee starting in April and the sales company sanction procedures imminent, all commercial banks decided on voluntary compensation in a direction similar to Woori Bank.

With the first case of voluntary compensation emerging from Hana Bank, each commercial bank plans to speed up compensation by supplementing or establishing internal working groups and external expert groups responsible for consultation and review. On the morning of the 29th, through a temporary board meeting lasting over an hour, KB Kookmin Bank, which was the last among major commercial banks to accept the FSS's dispute resolution standards, decided to establish a 'Voluntary Adjustment Council' to support investor compensation processing together with the existing customer protection department. Previously, KB Kookmin Bank had deployed over 200 employees to conduct a full-scale investigation due to its large sales volume compared to other banks.

The newly established 'Voluntary Adjustment Council' will include external experts with extensive knowledge and experience in relevant laws and consumer protection as committee members. These external expert members will closely examine the facts and individual elements of the sales process for each investor to assist in calculating compensation amounts. A KB Kookmin Bank official explained, "We will promptly carry out compensation procedures sequentially from cases where losses are confirmed and make every effort to protect investors."

On the same day, Shinhan Bank also decided to accept the FSS dispute resolution standards and proceed with voluntary compensation for investors through a board meeting lasting about 30 minutes. Shinhan Bank announced that it will accelerate compensation by establishing a 'Voluntary Adjustment Council' within the Consumer Protection Group, including external experts with rich experience in financial product knowledge, consumer protection policies, and laws.

Shinhan Bank has been operating a dedicated task force (TF) related to Hong Kong ELS since June last year, and before the board meeting, 17 members recently reviewed various compensation scenarios. A Shinhan Bank official said, "We will promptly proceed with compensation for loss customers and prepare measures to prevent recurrence regarding inspection points, fulfilling our social responsibility as a corporate citizen."

[Image source=Yonhap News]

Earlier, NH Nonghyup Bank and SC First Bank held board meetings on the afternoon of the 28th and decided on voluntary compensation. Both banks plan to conduct adjustment procedures targeting loss customers by forming voluntary adjustment councils or committees including external experts. These two banks formed Hong Kong ELS task forces in August-September last year and have been preparing for large-scale loss incidents.

Hana Bank, which decided on voluntary compensation at the board meeting on the 27th, established the 'Hong Kong H-Index ELS Voluntary Compensation Committee' and the 'Hong Kong H-Index ELS Voluntary Compensation Support Team' within the Consumer Protection Group to handle damage compensation. The Voluntary Compensation Committee consists of 11 members, including three external experts. Following the board's decision, Hana Bank reviewed and resolved individual voluntary compensation plans submitted to the committee held on the 28th, and paid compensation after reaching agreements with some investors. A Hana Bank official stated, "We will do our best to achieve smooth communication and compensation with investors," adding, "Through the Voluntary Compensation Committee, we will objectively grasp individual elements and facts for each investor and strictly apply the FSS standards to conduct a fair compensation process."

Woori Bank, which was the first to decide on voluntary compensation on the 22nd, plans to proceed with voluntary compensation by forming a 2-3 member team centered on the trust department to review consumer protection and related laws. The amount of Hong Kong ELS subject to Woori Bank's voluntary adjustment is about 41.5 billion KRW, with the total compensation amount estimated to be less than 10 billion KRW. A Woori Bank official explained, "We will begin full-scale adjustment procedures targeting investors whose losses are confirmed," and added, "Once consultations with investors are completed, we aim to pay compensation within a week."

Meanwhile, analyzing the loss and compensation scale mainly for Hong Kong ELS products sold from January to July 2021, the banking sector's compensation scale is expected to reach at least 2 trillion KRW. The maturity amount of H-Index ELS in the banking sector from January to July this year reaches 10 trillion KRW, and assuming confirmed losses at 50%, the cost to compensate an average of 40% is estimated. Most commercial banks are expected to reflect this estimated compensation amount as a provision in the first quarter of this year.

The 'Mortgage Refinancing' service through an online, one-stop refinancing infrastructure surpassed 10,000 applicants within 15 days of its launch, with the application amount approaching 1.8 trillion won. The photo shows an ATM of a commercial bank installed in Yongsan-gu, Seoul, on the 25th. Photo by Jinhyung Kang aymsdream@