Private Fund Sales Blocked in Banking Sector... Kookmin Bank Alone Sees 2 Trillion Won Increase in One Year (Comprehensive)

Commercial Banks' Private Equity Fund Sales Drop 30% in One Year
'Top Seller' Woori Also Loses Over 5 Trillion Won... Total 7 Trillion Won Vanishes
Guideline Coordination Underway... New Deal Fund Expected to Revitalize Market

[Asia Economy Reporter Park Sun-mi] Due to a series of private fund redemption suspensions triggered by overseas interest rate-linked derivative-linked funds (DLF), Lime, Optimus, and others, the scale of private fund sales by major commercial banks has shrunk by as much as 30% over the past year. Furthermore, with excessive compensation liabilities imposed on sellers, some banks are restricting private fund sales, and future performance is expected to decline even further.

According to the Korea Financial Investment Association and the financial sector as of the end of July this year, the proportion of private fund sales by banks stood at about 5.10%, down from 7.61% a year earlier. This contrasts with the securities industry's private fund sales ratio, which rose from 82.02% to 83.87% during the same period.

Among the five major banks, only KB increased by nearly 2 trillion won

The sales performance of the five major commercial banks was even more distinctly divided depending on whether they were involved in fund incidents. KB Kookmin Bank, which was unrelated to the private fund incidents, saw its private fund sales balance surge to 7.5 trillion won as of the end of July, up nearly 2 trillion won from 5.77 trillion won a year earlier.

Woori Bank, which was the top seller among the five banks with 7.55 trillion won in private fund sales a year ago, shrank to 2.79 trillion won this year amid successive private fund incidents. Shinhan Bank also sharply declined from 4.81 trillion won a year ago to 3.15 trillion won currently. Hana Bank decreased from 3.83 trillion won to 2.23 trillion won, and NH Nonghyup Bank dropped from 840 billion won to 300 billion won. Excluding Kookmin Bank, the private fund sales volume of the other four banks evaporated by about 30%, or roughly 7 trillion won, over the past year.

Bank sector's private fund sales likely to take time to restart
Awaiting guidelines

For the time being, private fund sales in the banking sector are unlikely to restart. This is because the financial authorities and banks have yet to finalize coordination on guidelines that strengthen internal controls when banks sell financial products like funds that do not guarantee principal. Although the suspension orders on private fund sales issued by financial authorities to banks have expired, making fund sales technically possible, the absence of established guidelines has created a mood to postpone sales until after implementation within the year.

An official from Bank A said, "Private fund sales are possible, but headquarters has issued instructions not to sell yet," adding, "Once the 'Model Code on Internal Controls for Banks' Sales of Non-Deposit Financial Products' is finalized, internal regulations will be revised accordingly, and private fund sales will commence." The official further lamented, "Given the current atmosphere where banks bear full responsibility if defaults occur, selling private funds is a challenging task."

As distrust spreads over funds sold by banks due to private fund incidents, the public fund market is also shrinking. Comparing the public fund sales balances in the banking sector at the end of last year and the first half of this year, KB Kookmin Bank increased from 14.55 trillion won to 16.99 trillion won, and Shinhan Bank rose from 14.09 trillion won to 15.06 trillion won, while Hana Bank, Nonghyup Bank, and Woori Bank all experienced declines.

Public funds also 'stall'... Redemption suspensions emerging in public funds as well
Will the New Deal Fund revive the bank fund sales market?

Although the decline is not as large as with private funds, a downward trend is evident. In particular, redemption suspension incidents, which had been concentrated in private funds, are spreading to some public funds, darkening the outlook for bank fund sales. The 'Kiwoom Global Alternative' fund, a public fund that indirectly invests in overseas asset managers' bond funds, recently suspended redemptions, leaving major commercial banks that sold it uneasy.

Some expect that the New Deal Fund promoted by the government could revive the bank fund sales market. Since various related products focusing on the New Deal Fund will be launched, it is considered sufficient to regain the interest of customers who had previously shunned funds.

However, since the policy-type New Deal Fund also raises funds from general investors through a private indirect public offering method, the risk of incidents similar to private funds remains a concern for sellers. Banks that sold Lime funds have already accepted unprecedented 100% compensation following recommendations from the Financial Supervisory Service, increasing their burden.

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