A Record 8,771 Bank Dispute Resolution Applications Last Year
Impact of Incomplete Sales of Hong Kong ELS by Banks
Disputes Expected to Decrease This Year Due to Regulatory Oversight and Industry Self-Regulation
Last year, the number of bank-related dispute resolution applications filed with the Financial Supervisory Service (FSS) reached an all-time high. This is attributed to a surge in applications from investors who suffered losses due to the large-scale losses in Hong Kong H-Share Index (Hang Seng China Enterprises Index·HSCEI) equity-linked securities (ELS). However, related disputes are expected to decrease this year due to self-regulatory efforts by financial authorities and banks.
According to the Korea Federation of Banks on the 12th, the number of bank dispute resolution applications filed with the FSS last year was 8,771, marking a record high. This represents a 385% increase compared to 1,809 cases in 2023. Even excluding cases where a single victim filed multiple overlapping applications with several financial companies, the number was 5,578, a 319% increase from 1,332 cases the previous year.
By bank, KB Kookmin Bank, which sold the most Hong Kong ELS among banks, had the highest number of cases at 2,782. NH Nonghyup Bank followed closely with 2,496 cases, then Shinhan Bank with 1,911 cases, SC First Bank with 730 cases, and Hana Bank with 528 cases.
The surge in dispute resolution applications last year was influenced by a large number of financial consumers who suffered losses from investing in Hong Kong ELS sold by banks filing complaints. Banks sold a large volume of ELS products based on the H-Share Index when the Hong Kong H-Share Index hit a record high in 2021.
However, problems arose when the Hong Kong H-Share Index plummeted in 2024, causing investors to incur massive losses. Financial authorities determined that banks had incompletely sold the high-risk ELS products to consumers without properly disclosing the risks from the outset, and decided on partial compensation. Most victims received relief from banks ranging from 20% to over 60% of their losses.
Victims' group representatives of the Hong Kong ELS incident are protesting in front of the Financial Supervisory Service in Yeouido, Seoul, in April last year. Photo by Yonhap News.
With ELS damage relief nearly complete, bank dispute resolution applications are expected to decrease this year. A financial industry official said, "Since the Hong Kong ELS incident, there have been no large-scale financial consumer damage cases in the banking sector," adding, "We expect related damages to decrease compared to last year."
Efforts by financial authorities to eradicate incomplete sales are also expected to help reduce related damages. The Financial Services Commission is preparing institutional improvement measures related to the Hong Kong H-Share Index ELS incident. Although a ban on banks selling high-risk products like ELS was considered, concerns were raised that this could limit consumers' choices, so the measures are expected to be decided at a lower level. Currently, it is known that strict restrictions on product sellers and sales only at regional hub branches are likely options. The Financial Services Commission plans to announce the improvement measures once finalized.
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