Hana Bank Decides to Join KIKO Bank Council... What About Other Banks? (Comprehensive)

Hana Bank's Decision to Restore Customer Trust
Other Banks Discuss Whether to Accept FSC Compensation Decision First
Participation in Bank Council to Be Reviewed Later

[Asia Economy Reporter Kim Min-young] KEB Hana Bank has decided to participate in the ‘Bank Council’ that handles additional dispute voluntary adjustments related to the foreign exchange derivative product KIKO incident. Attention is focused on whether other banks will follow suit.

According to the financial sector on the 8th, Hana Bank held an extraordinary board meeting on the same day and decided to participate in the bank council for additional dispute adjustments regarding KIKO.

Previously, in December last year, financial authorities set a policy that if banks that sold KIKO products accept dispute adjustment decisions, a bank council would be formed to voluntarily adjust compensation amounts for companies applying for additional dispute adjustments due to damages.

A Hana Bank official said, “This is a decision to end the long-standing KIKO-related disputes and secure customer trust,” adding, “Beyond simply the obligation to pay compensation, we decided to fulfill our social responsibility as a financial institution by sharing the pain with the affected companies.”

Hana Bank plans to establish compensation standards through voluntary adjustments with participating banks by identifying the companies eligible for compensation among the 147 affected companies recognized by the Financial Supervisory Service (FSS) once the council is formed.

There are a total of 11 banks that sold KIKO products, and Hana Bank is the first to express its intention to participate in the council. According to the financial sector, the banks that must decide on participation in the council are Shinhan, KB Kookmin, KEB Hana (including former Korea Exchange Bank), Woori, NH Nonghyup, SC First, Korea Citi, IBK Industrial, KDB Industrial, DGB Daegu, and BNK Busan Bank.

The FSS has shortlisted 147 affected companies as subjects for dispute adjustment. These companies entered into contracts with excessive amounts (over-hedging) compared to their actual export amounts at the time of the KIKO contracts.

Other banks have stated that six banks will start discussions on the council after the FSS Dispute Mediation Committee’s decision on compensation is made. A bank official said, “We are internally reviewing the Dispute Mediation Committee’s compensation decision, and the council discussions will be held afterward.”

The FSS extended the deadline for banks to decide on compensation by 30 days from today. On December 12 last year, the Dispute Mediation Committee ordered compensation of 15-41% of losses to four affected companies and notified six banks that sold KIKO products to these companies (Shinhan, Woori, Industrial, Hana, Daegu, and Citi Bank) to decide on accepting the dispute adjustment proposal by today. However, the banks requested an extension, stating they needed more time for review.

KIKO is a derivative financial product structured so that if the exchange rate fluctuates within a certain range, foreign currency can be sold at the agreed exchange rate, but if it goes beyond that range, large losses are incurred. Small and medium-sized export companies subscribed for exchange rate hedging purposes, but due to the global financial crisis in 2008, when the won-dollar exchange rate surged, 732 companies suffered damages amounting to about 3.3 trillion won.

This content was produced with the assistance of AI translation services.