Kiko Consortium Silent for a Month, Some Observers See 'Progress' Amid Meeting Doubts (Comprehensive)

No Follow-up Working Meetings Since Last Month's Kickoff
"Visible Internal Results Needed for Joint Discussion"

[Asia Economy Reporter Kim Hyo-jin] The bank consultative body set up to handle additional dispute self-adjustment issues related to the foreign exchange derivative product KIKO (KIKO) incident has remained quiet for over a month since its launch. While concerns about breach of trust, which have been consistently raised, remain high among banks, there are also voices suggesting some progress in discussions centered around certain banks.

According to the banking sector on the 11th, the consultative body consisting of 10 banks including Shinhan, Woori, Hana, KB Kookmin, NH Nonghyup, Daegu, Citi, SC First, HSBC, and IBK Industrial Bank held a kick-off meeting at the Financial Supervisory Service (FSS) on the 8th of last month but has not met even once since then. A bank official participating in the consultative body said, "There is no set schedule for future meetings." Another bank official explained, "There needs to be some visible internal outcome in any direction for joint practical discussions to be possible."

The FSS Dispute Mediation Committee recommended last December that Shinhan, Woori, Hana, Daegu, Citi, and KDB Industrial Bank, which sold the KIKO product, compensate four companies for 15 to 41% of their losses due to incomplete sales. However, except for Woori Bank, the other banks did not accept the recommendation. Subsequently, a consultative body was formed under the leadership of the FSS to autonomously discuss compensation plans for an additional 145 companies eligible for relief. KDB Industrial Bank did not participate in the consultative body.

The banks that rejected the recommendation cited the reason that "compensating after the 10-year statute of limitations for claims of damages under civil law has passed could constitute a breach of trust harming shareholder interests." The FSS maintains the position that there are no civil or criminal issues with the banks' compensation, citing the fact that Korea has not introduced a derivative lawsuit system.

The derivative lawsuit system allows shareholders of a parent company holding a certain percentage of shares to directly hold the subsidiary's management legally accountable when the parent company does not hold the subsidiary's management responsible for misconduct. The FSS received this interpretation from four law firms at the time of the dispute mediation decision and conveyed it to the banks, reiterating this explanation at last month's consultative body meeting.

'Some Banks Consider Forward-Looking Review'
Likely to Take Time Due to Differences in Understanding Among Banks

In this regard, some banks are reportedly conducting additional consultations with law firms recently advised by the FSS or requesting specific legal analysis materials for review. A banking sector official said, "There is a voice among banks to find a magnanimous solution to somehow resolve the issue," adding, "Some are proceeding with discussions based on compensation and examining reasons why it should not be done."

However, the official predicted, "Since the banks' positions have already been clearly established, the possibility of forward-looking discussions rapidly gaining momentum at once is low."

The varying levels of understanding of the issue among banks also make it difficult for the consultative body to speed up discussions immediately. An FSS official explained, "Banks that have not previously reviewed the dispute mediation plan essentially have to study the issue from scratch, so there is a significant variance in the progress of discussions among banks." Considering that it took one and a half years to create the dispute mediation plan for the four companies, the FSS's position is that it is premature to judge the consultative body at this point, only a month after its launch.

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