Yoon Seok-heon: "If Lime is not 100% compensated, it will affect financial company evaluations"... Pressure on sellers as decision deadline approaches (Comprehensive)

"Prompt Acceptance is the Path to Coexistence" Emphasized
Policy to Reflect Acceptance Adjustment in Reality Evaluation

Yoon Seok-heon, Governor of the Financial Supervisory Service (Photo by Yonhap News)

[Asia Economy Reporter Kim Hyo-jin] Yoon Seok-heon, Governor of the Financial Supervisory Service (FSS), expressed on the 25th his expectation that the sales companies will accept the dispute resolution plan for "100% compensation of the Lime Trade Finance Fund." This statement came as the deadline for deciding whether to accept the plan approaches, which is also interpreted as an attempt to exert some pressure on the financial companies involved.

Governor Yoon stated during the executive meeting that morning, "Accepting the dispute resolution promptly from the customer's perspective is ultimately a path of coexistence that also helps enhance shareholder value," according to the FSS.

"Neglecting victim relief endangers management foundation"

Governor Yoon also pointed out, "If victim relief is neglected and both customer and market trust are lost, the foundation of financial company management will inevitably be at risk, which must be deeply considered."

He added, "It is time for the financial supervisory system to shift towards consumer protection in line with recent trends," urging improvements so that consumer protection efforts, such as accepting dispute resolution decisions by the Dispute Resolution Committee, can be more importantly considered during consumer protection evaluations and management evaluations of financial companies.

The FSS Dispute Resolution Committee, in June, applied Article 109 of the Civil Act, "Contract Cancellation Due to Mistake," to four dispute resolution applications regarding the Lime Trade Finance Fund sold since November 2018, recommending 100% compensation. This is the first recommendation for full principal compensation of an investment product.

The largest sales volume of the fund was by Woori Bank at 65 billion KRW. Shinhan Financial Investment sold 42.5 billion KRW, Hana Bank 36.4 billion KRW, Mirae Asset Daewoo 9.1 billion KRW, and Shinyoung Securities 8.1 billion KRW, totaling 161.1 billion KRW. The FSS initially requested the sales companies to decide on acceptance by the 27th of last month.

The sales companies requested the FSS to extend the decision deadline through their boards of directors, and the FSS accepted this, asking for notification of acceptance by the 27th of this month. Since accepting the resolution plan has the effect of a settlement in court, the sales companies believe it is necessary to review acceptance more carefully.

"Banks urged to strengthen supervisory responses due to negligence in risk checks amid expansion of non-interest income"

Governor Yoon also urged both the FSS and financial companies to thoroughly manage risks related to the expansion of non-interest income.

Domestic banks have been pursuing expansion of investment and fee income due to decreased interest income amid a low-interest-rate environment, but Governor Yoon argued that they neglected to review the accompanying risk factors, resulting in outcomes such as incomplete sales of private equity funds.

Governor Yoon stated, "Non-interest income is not risk-free, so cost aspects must also be seriously considered," and urged, "Going forward, financial companies should not operate solely based on revenue but actively strive to make decisions fully considering the associated risks, while supervisory responses will also be strengthened."

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