Hana Bank Takes Proactive Measures for 'KIKO Response'

Decision to Attend 'Bank Consultative Body' for Voluntary Adjustment with 147 KIKO-Affected Companies
Voluntary Adjustment Premised on Acceptance of Prior FSC Dispute Resolution Recommendation... Effectively a KIKO Compensation Decision
Banks Expected to Announce Willingness to Accept KIKO Compensation by the End of This Month

[Asia Economy Reporters Haeyoung Kwon, Minyoung Kim] KEB Hana Bank has decided to participate in a bank council that will address the voluntary adjustment issue for additional compensation to companies affected by the foreign exchange derivative product 'KIKO'. It is the first among banks to do so. Participation in the bank council is premised on accepting the Financial Supervisory Service's (FSS) recommendation for compensation to affected companies made earlier last month, which can be seen as Hana Bank indirectly expressing its intention to accept KIKO compensation.

According to the financial sector on the 11th, Hana Bank decided at the board meeting held on the 8th to participate in the bank council for additional dispute resolution regarding KIKO.

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

Earlier, the FSS Dispute Mediation Committee decided on the 13th of last month that six banks should compensate four KIKO-affected companies for 15-41% of the damages. The FSS announced that if banks accept the mediation proposal, voluntary adjustments for 147 affected companies would begin subsequently. Hana Bank reversed the order by skipping the expression of acceptance for the prior dispute mediation results and instead announced its intention to participate in the next stage of voluntary adjustment.

A bank official said, "Participation in the bank council for voluntary adjustment with the additional 147 KIKO-affected companies is effectively premised on accepting the compensation recommendation for the four companies subject to prior dispute mediation," adding, "It is interpreted as a measure to indirectly convey to the FSS that Hana Bank will accept KIKO compensation while alleviating the burden of being the first bank to publicly announce acceptance of the compensation plan."

Overseas, including the UK and Japan, banks have promptly compensated in accordance with supervisory authorities' compensation recommendations or voluntary intentions related to incomplete sales of foreign exchange derivatives similar to KIKO. In contrast, domestically, despite the Supreme Court ruling in 2013 recognizing incomplete sales, compensation has not been made except for companies that filed lawsuits. This was due to the lukewarm stance of both financial authorities and banks regarding KIKO compensation. Subsequently, after Yoon Seok-heon took office as the head of the FSS in 2018, the KIKO issue was revisited, leading to a compensation conclusion in about a year and a half.

Some banks had tentatively concluded to accept the compensation plan since the FSS made the KIKO compensation decision. In particular, Woori, Hana, and Daegu Banks have proactively considered the possibility of acceptance early on. Other banks are also reported to have a high likelihood of acceptance despite some differences in stance.

A financial sector official said, "In the case of Hana Bank, there have been several conflicts with the FSS over the holding company and bank governance issues, compounded by controversies over incomplete sales of overseas interest rate-linked derivative-linked securities (DLS) and data deletion," adding, "It can be interpreted that Hana Bank was the first to express its intention to actively accept the FSS's KIKO compensation decision in order to improve relations with the FSS and protect consumers."

Currently, some banks are reported to be persuading their boards and holding meetings at the executive level to emphasize the necessity of KIKO compensation after deciding on it. The deadline for banks to express their intention to accept KIKO compensation was postponed once from the 8th. It is expected that banks will gradually announce their acceptance of KIKO compensation to the FSS after board approval as early as the end of this month.

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