FSS: "Lime Asset Transferred to Bad Bank... Not Intended to Evade Responsibility of Sellers or Authorities"

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[Asia Economy Reporters Jihwan Park, Minji Lee] The financial authorities clarified that the establishment of a newly created bridge management company (bad bank) responsible for asset recovery of Lime Asset Management's redemption suspension funds worth 1.7 trillion KRW is not intended to allow distributors or others to evade responsibility. They stated, "The fund transfer is being carried out in preparation for unexpected operational suspensions of Lime management and is not aimed at evading responsibility of either distributors or supervisory authorities."

The Financial Supervisory Service (FSS) explained at a press briefing on the 10th regarding the "status of Lime fund transfers and related handling," saying, "Even if the fund is transferred to the bridge management company, only the management company changes, and the status of the distributors remains unchanged."

Kim Donghoe, Deputy Director of Financial Investment at the FSS, emphasized, "The distributors' investment is for recovering the remaining assets of the fund and is done to protect customers," and "It is not a measure to dilute or evade the distributors' responsibility."

The FSS stated that although transferring back to the original management company was considered, it was judged to be impractical due to difficulties in securing profitability through fund management and obstacles such as reputational risk. They explained that transferring the fund to a newly established bridge management company, which involves investment from distributors responsible for customer protection, was concluded to be the only viable option. They also took into account that Lime's credibility had already plummeted due to additional illegal activities after the redemption suspension incident, and that the possibility of operational interruptions at Lime due to key personnel departures could not be ruled out.

Deputy Director Kim Donghoe said, "Given that asset recovery is inevitably a long-term process, the need for a prompt change in the fund management entity (fund transfer) was raised," and added, "There was a consensus that transferring only to a trustworthy management company could block the possibility of further illegal activities and maximize asset recovery."

The established bad bank will only take over the existing Lime non-performing funds to minimize customer investment losses and focus solely on asset recovery. The bridge management company will take over the funds as they are and will be responsible only for the recovery and management of incorporated assets, investor distribution, and other fund management tasks. Fund assets will not be incorporated into the bridge management company's proprietary assets; instead, the trustee will hold nominal ownership for each fund, and the bridge management company will act as the fund manager.

The initial capital of the bridge management company was set at 5 billion KRW. The final investment ratio will be calculated considering the sales balance as of the end of April this year for the 173 sub-funds with redemption suspensions.

The FSS plans to complete shareholder agreements by the end of this month, followed by investment approval (major shareholder) and corporate establishment next month. Subsequently, after undergoing the financial authorities' registration review for specialized private equity management companies, practical work will proceed aiming for an official launch in August.

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