Korea Citibank Decides to Pay Compensation to Some Companies Affected by KIKO

[Asia Economy Reporter Song Seung-yoon] Korea Citibank decided on the 14th to pay compensation to some affected companies in relation to the foreign exchange derivative product KIKO incident.

Korea Citibank passed this agenda at the board meeting held on the same day.

KIKO is a derivative product structured so that if the exchange rate fluctuates within a certain range, foreign currency can be sold at the agreed rate, but if it goes beyond the range, it results in significant losses. Exporting small and medium-sized enterprises (SMEs) joined in large numbers expecting a decline in the exchange rate, but suffered huge damages when the exchange rate surged during the 2008 financial crisis.

Korea Citibank maintains that it still has no legal responsibility, but it is reported that the decision to pay compensation was made as part of its social responsibility toward SMEs struggling due to the COVID-19 pandemic. Korea Citibank did not disclose the specific level of compensation or the number of companies to be compensated on that day.

In December last year, the Financial Supervisory Service's Dispute Mediation Committee recognized the liability for compensation due to incomplete sales of KIKO by six banks including Korea Citibank, and ordered compensation of 15-41% of losses to four affected companies. Additionally, for the remaining 147 affected companies, the committee requested the banks to conduct voluntary mediation (recommendation for agreement) based on the dispute mediation results.

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