FSS Unable to Reach Conclusion on IBK Disciplinary Hearing Related to Private Equity Fund Scandal (Update)

Meeting Resumes on the 5th of Next Month

[Asia Economy Reporter Park Sun-mi] On the 28th, the Financial Supervisory Service (FSS) failed to finalize disciplinary actions against Industrial Bank of Korea (IBK), which caused massive losses to investors through the sale of Lime Fund and Discovery Fund.

On the same day, the FSS held a disciplinary review committee meeting and presented the results of the sector inspection on Discovery Asset Management and IBK for deliberation, but no conclusion was reached. The FSS stated, "The disciplinary review committee conducted the deliberation after thoroughly listening to statements and explanations from multiple company representatives (including legal counsel) and the Inspection Bureau," adding, "As a result, it was decided to resume the meeting on the 5th of next month."

From 2017 to 2019, IBK sold Discovery US Fintech Global Bond Fund and Discovery US Real Estate Senior Bond Fund worth 361.2 billion KRW and 318 billion KRW respectively. However, the US asset manager failed to recover the bonds invested with the fund's capital, resulting in delayed redemptions of 69.5 billion KRW and 21.9 billion KRW respectively. IBK also sold 29.4 billion KRW worth of the Lime Fund, which caused a large-scale redemption suspension incident.

The FSS has begun full-scale disciplinary review committee meetings for a total of eight banks that sold the problematic private equity funds, starting with IBK. Prior to the disciplinary review, it is reported that the FSS pre-notified former IBK President Kim Do-jin, who was the bank president at the time of the fund sales, of a severe disciplinary action. Accordingly, the banking sector is closely watching the level of disciplinary measures against former President Kim.

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