Shinhan Financial Group Holds Recent Board Meeting to Discuss 'Lime Incident'

[Asia Economy Reporter Haeyoung Kwon] Shinhan Financial Group, suffering from Lime Asset Management's fund rollover scandal, recently held a board meeting to discuss future response measures.

According to financial sources on the 27th, Shinhan Financial Group's outside directors reviewed the current status caused by the Lime Asset Management incident at last week's board meeting and exchanged opinions on future impacts and response plans.

Shinhan Financial sold a total of 774.2 billion KRW worth of funds through its affiliates Shinhan Investment Corp. and Shinhan Bank, with 393.4 billion KRW and 380.8 billion KRW respectively (as of November last year). Due to Lime Asset Management's fund yield rollover, funds worth 1.6 trillion KRW are currently suspended from redemption, and a significant number of customers of Shinhan Financial Group's affiliates, which have the largest sales amount among financial groups, are expected to suffer damages from the fund redemption suspension. In particular, it was recently confirmed that Lime Asset Management arbitrarily invested 100 billion KRW of the 270 billion KRW normal fund investment from Shinhan Bank into non-performing funds, expanding the repercussions.

Shinhan Investment Corp.'s preferential repayment right is also one of the key issues in this incident. Previously, Shinhan Investment Corp. signed a total return swap (TRS) contract with Lime Asset Management and lent 350 billion KRW to the non-performing trade finance fund. Currently, the amount suspended from redemption reaches 1.6 trillion KRW, and assuming a loss rate of 50%, the recoverable amount is 800 billion KRW. If securities firms that signed TRS contracts with Lime Asset Management, including Shinhan Investment Corp., exercise their preferential repayment rights, the amount that general investors can recover will decrease accordingly. In particular, following the Financial Supervisory Service's investigation results, Shinhan Investment Corp. was found to have prior knowledge of the non-performing status of Lime Asset Management's trade finance fund and suspected public offering collusion, leading to a decision to request a prosecution investigation, raising concerns about internal control failures. For these reasons, whether Shinhan Investment Corp. will exercise its preferential repayment rights under the TRS contract has become a major issue.

A Shinhan Financial Group official explained, "After the due diligence results on the Lime Asset Management incident are announced in early February, we will be able to establish response measures."

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