Hana and Busan Bank, Lime Fund Compensation Ratio 'Up to 80%'

Financial Supervisory Service, Disclosure of Subcommittee Results

[Asia Economy Reporter Jin-ho Kim] The Financial Dispute Mediation Committee (FDMC) of the Financial Supervisory Service (FSS) has decided compensation ratios of 65% and 61% respectively for Lime Funds sold by Hana Bank and Busan Bank. This decision holds them liable for damages due to incomplete sales and other issues.

On the 14th, the FSS announced that on the 13th it held the FDMC meeting for Hana Bank and Busan Bank, which agreed to dispute mediation, and made this decision.

The FDMC applied a basic compensation ratio of 55% for Hana Bank and 50% for Busan Bank, considering the degree of responsibility for causing large-scale and multiple damages due to negligence in investor protection as fund sellers, and determined the compensation ratios for each investor (2 persons) as 65% and 61%, respectively.

In the case of Hana Bank, it was found that high-risk product funds (grade 2) were sold non-face-to-face without analyzing the investor’s investment propensity. For Busan Bank, the issue was pointed out as the failure to explain the risks of the master fund, which accounts for 60% of the investor’s assets.

The FSS applied a 30% compensation ratio for violations of the suitability principle and duty of explanation by sales staff, consistent with previous dispute mediation cases such as the DLF (Derivative Linked Fund) incident. Considering the negligence in investor protection at the head office level, an additional 25 percentage points were added for Hana Bank and 20 percentage points for Busan Bank. Furthermore, the final compensation ratio was calculated by adjusting for aggravating factors on the seller’s responsibility and the investor’s own responsibility for each individual investor.

This dispute mediation proposal will be established if the applicant and the bank accept the proposal within 20 days after receipt.

For the remaining investors who suffered damages, voluntary mediation will be promptly conducted with compensation ratios ranging from 40% to 80% based on the compensation standards of this FDMC. The FDMC expects that if the mediation process proceeds smoothly, the relief for the unpaid 61.9 billion KRW (393 accounts) due to redemption delays will be concluded.

Meanwhile, the FDMC was also scheduled to decide on compensation for Daishin Securities, which sold Lime Funds, but due to differing opinions among committee members, it was decided to discuss the matter again in the future. An FSS official stated, "Daishin Securities has contentious issues, so another FDMC meeting will be held, but the date has not been set."

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