Banks Hit Again... Lime's 'Disastrous Management' Set to Trigger Another 100 Billion Won Bomb in April

Woori and Hana Bank Followed by Shinhan Bank Announcing Redemption Suspension for Sold Funds
Among 270 Billion KRW Sales of Normal 'CI Fund', 100 Billion KRW Arbitrarily Flowed into Problematic 'Return Rate Circular Trading' Funds
Investor Redemption Suspension Inevitable When Shinhan Bank Sold Funds Mature Starting April

[Asia Economy Reporter Kwon Haeyoung] Lime Asset Management has announced a suspension of fund redemptions at Shinhan Bank, following Woori Bank and KEB Hana Bank. Among the normal Lime funds sold by Shinhan Bank, 100 billion KRW flowed into problematic Lime funds, whose redemptions were suspended last year due to a 'rate of return juggling' scheme unknown even to the bank. With the suspension of redemptions for funds sold by Shinhan Bank becoming a foregone conclusion starting this April when maturities come due, the Lime incident appears to be spreading as a time bomb threatening the entire banking sector.

According to financial authorities on the 15th, about 100 billion KRW out of 270 billion KRW of Lime Asset Management's 'Credit Insured (CI) Trade Finance Fund' sold to investors by Shinhan Bank was reinvested last year into the Pluto Fund, whose redemptions were suspended.

The CI funds sold by Shinhan Bank are not the three funds (Tetis No. 2, Pluto FI D-1, Pluto TF-1) whose redemptions were forcibly suspended earlier. The problem is that within this CI fund series, between 7% and up to 30% of the investment amounts per fund were reinvested into Lime Asset Management funds with suspended redemptions without the bank's knowledge. Lime Asset Management notified Shinhan Bank of the possibility of redemption suspension, putting investors who purchased CI funds through Shinhan Bank at risk of losing their investments.

A financial industry insider said, "Lime Asset Management funds have a complex structure where Fund A invests in Fund B, and Fund B invests in Fund C," adding, "Although CI funds still have time until maturity and investors have not been unsettled, there is a high possibility that redemptions will be suspended when maturity arrives in April, leading to a situation where investors cannot recover their funds."

During this process, Lime Asset Management was found to have deceived the selling party, Shinhan Bank, and issued illegal management instructions. Without obtaining consent from investors or the selling party, they arbitrarily invested normal fund money into distressed funds, contrary to previously communicated management policies.

A Shinhan Bank official explained, "We confirmed belatedly that Lime Asset Management arbitrarily incorporated CI fund assets into problematic funds without the consent of the selling party or investors," adding, "The management instructions from the asset manager were delivered to the selling party two months later, making it difficult to identify this fact."

Accordingly, the Lime incident shows signs of spreading across the entire banking sector. The bank-specific sales amounts of the three controversial Lime Asset Management funds were identified as 325.9 billion KRW for Woori Bank and 95.9 billion KRW for Hana Bank. However, with funds from the CI funds sold by Shinhan Bank flowing into problematic funds, Shinhan Bank is effectively in the same position as having sold about 100 billion KRW of the problematic funds, meaning that three of the four major commercial banks are involved in this incident. Kyongnam Bank is also reported to have sold about 20 billion KRW of Lime Asset Management's CI funds.

The banks express a sense of injustice regarding responsibility controversies as sellers. They argue that the core issue is the asset manager's fraud, not incomplete sales of the products.

An official from a major commercial bank said, "The asset manager deliberately deceived by even committing illegal acts, so the selling party had no way of knowing," and added, "We will take all possible measures, including legal action against Lime Asset Management, once the facts are confirmed."

The Financial Supervisory Service (FSS) is also actively responding to the Lime Asset Management incident. Once the audit results from Samil Accounting Corporation are released at the end of this month, the FSS plans to begin inspections of the selling parties to ascertain the facts. The inspection is expected to take place in early February after the Lunar New Year, targeting Woori Bank, Shinhan Bank, Hana Bank, and others.

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