Woori Bank and IBK to Compensate Lime Investors up to 78%... First Dispute Mediation in Banking Sector (Comprehensive)

The Basic Compensation Ratio is 55% for Woori Bank, 50% for IBK, and previously 60% for KB Securities
Woori Bank "Will promptly hold a board meeting to discuss approval"

[Asia Economy Reporter Wondara] Woori Bank and Industrial Bank of Korea (IBK) have been ordered to compensate Lime Fund investors for up to 78% of their investment losses. The basic compensation rates were set at 55% and 50%, respectively, and are expected to be applied to other banking sector dispute resolutions. Woori Bank stated, "We will promptly convene a board meeting to discuss whether to approve the decision."

Basic compensation rates set at 55% for Woori Bank and 50% for IBK... lower than KB Securities (60%)

On the 24th, the Financial Supervisory Service (FSS) announced the results of the Financial Dispute Mediation Committee (hereafter, the Mediation Committee), deciding compensation rates of 65% to 78% for three cases of Lime Fund investment losses. In Woori Bank’s case, they were ordered to compensate 78% for selling high-risk products to an 82-year-old senior who requested principal protection, and 68% for arbitrarily classifying an investor’s risk profile as 'aggressive' and selling ultra-high-risk products to a small business. For IBK, they were ordered to compensate 65% for arbitrarily classifying a retired customer in their 60s, who wanted a fixed deposit, as 'risk-neutral' and selling the product accordingly.

The basic compensation rates for Woori Bank and IBK were set at 55% and 50%, respectively. An FSS official explained the reason these rates are lower than KB Securities’ 60% by stating, "KB Securities had more access to information because they had loan transactions with Lime, yet still engaged in incomplete sales, whereas banks only handled sales operations." Initially, the financial sector expected that banks’ customers, being more 'stability-oriented' than securities customers, would receive higher basic compensation rates than KB Securities (60%).

Following the confirmation of these compensation rates, the two banks must proceed with mediation for other affected investors. The scale of Lime Fund sales by Woori Bank and IBK amounts to approximately 270 billion KRW and 28 billion KRW, respectively. Woori Bank currently has 182 disputes filed, while IBK has 20. The FSS plans to allow voluntary adjustments with compensation rates ranging from 40% to 80% (30% to 80% for corporations), depending on investors’ suitability principles and investment experience. If the mediation process proceeds smoothly, relief for the outstanding 298.9 billion KRW (1,590 accounts) delayed due to redemption suspension will be concluded.

First banking sector dispute mediation case... likely to apply to other banks

As this is the first Mediation Committee result in the banking sector, similar standards are expected to be applied to dispute mediations for other banks such as NH Nonghyup Bank, Busan Bank, and Gyeongnam Bank. According to the FSS, as of the 15th of this month, a total of 682 dispute mediation applications have been received (351 from banks and 331 from securities firms). An FSS official stated, "The mediations will be conducted sequentially, but inspection procedures must take priority." The FSS is allowing advance compensation in the Lime incident, considering that waiting until losses are confirmed could exacerbate the suffering of many victims. In principle, compensation is possible only when losses are confirmed through redemption or liquidation.

Meanwhile, the Mediation Committee’s findings are expected to be reflected in the disciplinary hearing for Woori Bank scheduled for the 25th. Previously, the FSS had pre-notified Woori Bank Chairman Sohn Tae-seung of a 'suspension of duties' sanction. Similarly, KB Securities, whose CEO Park Jung-rim was also pre-notified of suspension, had their sanction reduced from suspension to a 'reprimand' after the mediation. When asked whether future mediation results would affect Woori Bank’s disciplinary measures, an FSS official replied, "There is no definite answer. Common sense suggests that the more mediation is achieved, the more favorable it will be for Woori Bank." Woori Bank stated, "We respect the Mediation Committee’s decision and will promptly initiate procedures such as convening the board once the decision document is notified, and will actively do our best to protect customers."

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