Citibank "Reviewing Compensation for 39 KIKO-Affected Companies Excluding Ilseong Highsco"

2012 Ilseong Hysco Debt Relief Rejected by FSC Dispute Mediation Proposal
Compensation Review for 39 Self-Adjustment Targeted Affected Companies

[Asia Economy Reporters Haeyoung Kwon, Minyoung Kim] Citibank Korea has decided not to accept the Financial Supervisory Service's (FSS) recommendation for compensation to Ilseong Highsco, a company affected by the 'KIKO' (Knock-In Knock-Out) derivative losses. However, it plans to consider compensation within the scope of court rulings for 39 other affected companies selected by the FSS for voluntary adjustment. Whether this will lead to actual compensation for KIKO-affected companies remains to be seen.

According to the financial sector on the 5th, Citibank held a board meeting the previous day to discuss whether to accept the KIKO compensation decision made by the FSS Dispute Mediation Committee in December last year and reached this conclusion.

A Citibank official explained, "We have decided not to accept the FSS Dispute Mediation Committee's compensation recommendation for Ilseong Highsco. However, for some companies that have not yet received court rulings but were suggested by the FSS, we are reviewing the facts and considering appropriate compensation if deemed suitable in light of court decisions."

In December last year, after holding the Dispute Mediation Committee, the FSS recommended that Citibank compensate Ilseong Highsco with 600 million KRW, which is 15% of the KIKO loss. According to the initial dispute mediation plan, six banks including Shinhan, Woori, KDB Industrial, KEB Hana, Daegu, and Citibank were to compensate four KIKO-affected companies with a total amount of 25.5 billion KRW (15-41% of the losses).

Citibank, after repeatedly requesting extensions for the decision deadline, ultimately decided not to accept the compensation recommendation for Ilseong Highsco. This decision reflects the fact that in 2012, through rehabilitation procedures, Citibank had already written off outstanding claims exceeding the amount recommended by the FSS Dispute Mediation Committee for Ilseong Highsco. However, Citibank has expressed its intention to start fact-finding investigations and review compensation for 39 affected companies where KIKO overhedging occurred. The estimated compensation amount for these companies is about 40 billion KRW.

By making a different decision from Woori Bank, which abruptly accepted the KIKO compensation plan last month, attention is now focused on the decisions of Shinhan, KDB Industrial, KEB Hana, and Daegu banks. Banks are required to notify the FSS of their acceptance or rejection of the KIKO compensation by the 6th.

The most notable is Shinhan Bank. Shinhan Bank has the largest compensation amount related to this dispute mediation, totaling 15 billion KRW. If it accepts this dispute mediation, the compensation amount for future voluntary adjustments could also reach 40 billion KRW.

Shinhan Bank will hold a board meeting on the afternoon of the 6th to discuss the KIKO dispute mediation plan. It is reported that opinions among outside directors are currently divided.

Hana Bank's decision is also drawing attention. The bank announced in early January that it would participate in a bank consultative body for KIKO voluntary adjustment. Participation in voluntary adjustment for 147 KIKO-affected companies was conditional on accepting the dispute mediation, which was seen as an indirect indication of accepting KIKO compensation. However, at the board meeting held in early February, Hana Bank requested an extension of the decision deadline to the FSS, stating that further review of the KIKO dispute mediation plan was necessary.

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