Shinhan Bank Joins Dispute Mediation for 'Loss-Not-Yet-Confirmed Lime Fund'

Financial Supervisory Service to Hold Disciplinary Committee Next Month... High Interest in Disciplinary Severity

[Asia Economy Reporter Kwangho Lee] Shinhan Bank is joining the dispute mediation process for the Lime private equity fund whose losses have not yet been confirmed. This is expected to influence the reduction of disciplinary measures during the financial authorities' sanction process.

According to the financial sector on the 8th, Shinhan Bank recently agreed to initiate the dispute mediation process for the Lime Credit Insured (CI) Fund. Accordingly, the Financial Supervisory Service (FSS) plans to conduct an on-site investigation in mid-month and hold a dispute mediation committee meeting next month.

In principle, compensation can only be made when losses are confirmed through redemption or liquidation, but in the Lime incident, where large-scale redemptions were suspended, many funds take a long time to confirm losses. Therefore, the FSS has been promoting a dispute mediation approach based on estimated loss amounts. Through mediation decisions based on estimated losses, victims are compensated first, with additional recoveries to follow.

Last month, for the first time in the banking sector, dispute mediation committees were held for Woori Bank and IBK Industrial Bank of Korea, initiating relief procedures for investors in Lime funds with unconfirmed losses.

Shinhan Bank had decided in June last year to prepay 50% of the principal to investors in the Lime CI Fund. The plan was to return half of the subscription amount to investors first and then settle again once the compensation ratio was finalized according to the FSS dispute mediation committee's decision.

Shinhan Bank's participation in the dispute mediation process is interpreted as an active move to provide relief to victims. There is also interest in how this will affect the severity of sanctions imposed by financial authorities.

The financial authorities are currently proceeding with sanction procedures against Shinhan Bank and Woori Bank, the sellers held responsible for the large-scale suspension of redemptions in the Lime fund.

Jin Ok-dong, CEO of Shinhan Bank, has been issued a warning, while Son Tae-seung, chairman of Woori Financial Group and former CEO of Woori Bank during the Lime incident, has been preliminarily notified of a suspension from duty-level disciplinary action. The second sanction review committee meeting is scheduled for the 18th of this month, following the one on the 25th of last month.

The FSS Financial Consumer Protection Department (Sobo Department) appeared as a witness for the first time at the sanction review, expressing opinions on Woori Bank's consumer protection measures and efforts to compensate victims. However, it did not participate in the Shinhan Bank sanction review.

The Sobo Department is reported to have evaluated Woori Bank's efforts to resolve damages positively. Woori Bank accepted the FSS dispute mediation proposal to return 100% of the principal to Lime fund investors and agreed to mediation for other Lime funds with unconfirmed losses, holding a dispute mediation committee meeting on the 23rd of last month.

The Sobo Department's presentation of opinions is attracting attention as it may influence the severity of sanctions.

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