Today Woori and Shinhan Bank 2nd Sanctions Review... "Will Efforts to Compensate Victims Be Recognized?"

Victims of the Lime Fund are holding a rally in front of the Financial Supervisory Service in Yeouido, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Kwangho Lee] The Financial Supervisory Service's (FSS) second disciplinary review committee for Woori Bank and Shinhan Bank, which sold Lime private equity funds, will reconvene on the 18th. Attention is focused on whether the dispute resolution results for the two banks will influence the severity of the disciplinary measures.

However, Son Tae-seung, Chairman of Woori Financial Group, who faces a harsher disciplinary level, is still likely to receive a severe penalty even if the severity is eased. Previously, the FSS gave institutional warnings to the two banks, and pre-notified Son and Jin Ok-dong, President of Shinhan Bank, of suspension and reprimand warnings, respectively. Shin Yong-byeong, Chairman of Shinhan Financial Group, received a cautionary warning. Among these, institutional warnings, suspensions, and reprimand warnings correspond to severe disciplinary actions.

The FSS disciplinary committee held a meeting on the 25th of last month but failed to reach a conclusion. At that time, the FSS inspection bureau's statements on Woori Bank's inspection agenda and the bank's defense took longer than expected, so the Shinhan Bank agenda was not even reviewed.

Intense disputes between both sides are expected again at the resumed disciplinary committee meeting. In Woori Bank's disciplinary review, the key issues are whether the bank had prior knowledge of the Lime fund's insolvency and the problem of improper solicitation by the bank. For Shinhan Bank, the point of contention between the FSS and the bank is whether severe disciplinary action against the CEO is warranted due to internal control failures.

Additionally, whether the consumer protection efforts of the two banks will affect the disciplinary severity for the CEOs is a matter of interest.

Last month, the FSS dispute resolution committee ordered Woori Bank to compensate two Lime fund investors for 68% and 78% of their losses, respectively. Woori Bank held an extraordinary board meeting on the 15th and accepted the dispute resolution committee's recommendation.

Shinhan Bank, after prepaying 50% of the principal for the Lime Credit Insured (CI) Fund last year, recently agreed to initiate related dispute resolution procedures. Accordingly, the FSS conducted an on-site inspection of Shinhan Bank from the 10th to the 12th and will hold a dispute resolution committee meeting next month.

Some speculate that even if the CEOs' disciplinary severity is reduced, it will be difficult for Chairman Son's disciplinary level to be lowered by two steps. The suspension Son received is the second-highest sanction among five levels: dismissal recommendation, suspension, reprimand warning, cautionary warning, and caution. If confirmed, he will be barred from reemployment in the financial sector for four years after his term ends. Even if reduced by one level to a reprimand warning, he would still be barred from reemployment in the financial sector for three years, making the practical effect similar.

Also, in the case of President Jin, merely agreeing to initiate the dispute resolution committee is unlikely to be considered a reason for mitigating the disciplinary action. However, since the disciplinary review is likely to be extended again, the severity of the discipline may be reduced depending on whether the dispute resolution committee's adjustment proposal is accepted afterward.

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