Woori and Shinhan Bank 3rd Sanctions Review... Will Woori Bank's Post-Action Efforts Be Recognized?

Woori Bank First to Conclude... Will Chairman Sohn Tae-seung's Disciplinary Level Be Lowered?
Shinhan Bank's Subcommittee Scheduled for the 19th... Possible Decision at Next Sanctions Review

Victims of the Lime Fund are holding a rally urging dispute mediation for victim protection regarding the Lime Fund. Photo by Jinhyung Kang aymsdream@

[Asia Economy reporters Kwangho Lee and Seungseop Song] On the 8th, the Financial Supervisory Service (FSS) will hold the 3rd Disciplinary Committee meeting regarding the sale of Lime Funds by Woori Bank and Shinhan Bank. Attention is focused on whether Woori Bank, which accepted the opinion of the Dispute Mediation Committee, will succeed in lowering the level of sanctions. Shinhan Bank’s Dispute Mediation Committee is scheduled for the 19th of this month, and the level of sanctions is expected to be decided at the next disciplinary meeting.

According to sources in the financial sector on that day, the FSS has individually notified Woori Bank and Shinhan Bank of the schedule for the 3rd disciplinary meeting. The FSS has pre-notified sanctions against Woori Bank and Shinhan Bank for incomplete sales under the Capital Markets Act and violations of internal control regulations under the Financial Company Governance Act.

Son Tae-seung, chairman of Woori Bank at the time of the Lime Fund sales, was notified of a heavy sanction of 'suspension from duty,' Jin Ok-dong, president of Shinhan Bank, was notified of a heavy sanction of 'reprimand,' and Cho Yong-byeong, chairman of Shinhan Financial Group, was notified of a light sanction of 'cautionary warning.'

The levels of sanctions for financial company executives are divided into five stages: dismissal recommendation, suspension from duty, reprimand, cautionary warning, and warning. Among these, reprimand and above are considered heavy sanctions. If a heavy sanction is received, reemployment in the financial sector is prohibited for 3 to 5 years after the current term ends.

This disciplinary meeting is likely to focus on Woori Bank. In cases where multiple financial companies are subject to FSS disciplinary meetings at once, the sanctions have usually been decided all at once after all deliberations were completed. However, the Dispute Mediation Committee for the Lime CI Trade Finance Fund sold by Shinhan Bank is scheduled for the 19th, and there is much speculation that the decision could be made at the disciplinary meeting scheduled by the FSS on the 22nd.

The unusual expectation that sanctions will be finalized for one financial company first is due to the slow pace of discussions. In the disciplinary meeting, explanations of disciplinary reasons by the Inspection Bureau and statements by the subjects are followed by arguments from both sides and judgments by the disciplinary committee members. It is known that in the previous two disciplinary meetings, most of the time was spent listening to the reasons for discipline and statements from both sides.

Woori Bank is currently disputing the FSS’s claim that internal controls were insufficient in the overseas interest rate-linked derivative-linked fund (DLF) incident, focusing on whether there was 'improper solicitation.' Improper solicitation refers to acts that hinder proper risk awareness for inexperienced general investors or actively recommend high-risk products. Shinhan Bank holds the position that imposing a reprimand on the bank president for internal control deficiencies is excessive.

Although the issues differ, both banks are expected to focus on having their consumer relief efforts recognized to reduce the final level of sanctions. Since financial company CEOs who receive reprimands or higher sanctions face restrictions on reappointment, they are actively emphasizing efforts for post-incident management and victim recovery. In Woori Bank’s case, some compensation payments to customers have already been completed following the decision made by the Dispute Mediation Committee in February.

The regulations on inspection and sanctions of financial institutions also specify that sanctions on executives and employees can be mitigated considering post-incident management, efforts to reduce losses, and whether compensation for losses has been made. Accordingly, cases such as Park Jung-rim, CEO of KB Securities, and Jung Young-chae, CEO of NH Investment & Securities, who were sanctioned for Lime Fund sales, have had their sanctions lowered to 'reprimand.' The FSS has also stated that it will take post-incident efforts into account.

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