'Hana Bank Lime Fund Sales Disciplinary Hearing on the 15th... Focus on Disciplinary Level'

Reduced Disciplinary Action Expected if Compensation Plan Accepted by Punishment Review Committee
Final Decision Anticipated by Mid-August

[Asia Economy Reporter Kim Jin-ho] The Financial Supervisory Service (FSS) has decided to compensate investors of Lime Asset Management's private equity funds sold by Hana Bank and Busan Bank for 40-80% of their losses, and the level of sanctions against these banks is expected to be finalized soon.

Previously, other banks accepted the FSS's compensation plan, resulting in reduced disciplinary measures, so the market expects Hana Bank and Busan Bank to actively accept the compensation plan as well. Even if the victims do not accept the compensation plan, if the banks' relief efforts are recognized, the level of sanctions is mitigated.

According to the financial sector on the 14th, the FSS held a dispute mediation committee meeting the day before and decided on compensation of up to 80% for the Lime funds sold by Hana Bank and Busan Bank.

The dispute mediation committee decided that investors who purchased Lime funds from Hana Bank and Busan Bank should be compensated 65% and 61%, respectively. For other investors, voluntary adjustments will be made with compensation ratios ranging from 40% to 80% according to the compensation standards. However, in the case of Daishin Securities, opinions among the dispute mediation committee members were divided, so further discussions will be held later. An FSS official said, "Daishin Securities has issues, so another dispute mediation committee meeting will be held, but the date has not been set."

Based on the dispute mediation committee's results, the FSS plans to hold a sanction review committee meeting on the 15th targeting Hana Bank. The FSS sanction review will examine four funds sold by Hana Bank at once. Hana Bank sold Lime funds worth 87.1 billion KRW, which were found to be fraudulent. It also sold the Italy Healthcare Fund (110 billion KRW), German Heritage Fund (51 billion KRW), and Discovery Fund (24 billion KRW), which were involved in controversies over incomplete sales and redemption suspensions.

To hold responsibility for the private equity fund incident, the FSS reportedly gave Hana Bank an institutional warning, a severe disciplinary level, in early this month. It is also known that Ji Sung-kyu, then CEO of Hana Financial Group, received a disciplinary warning or higher.

However, the level of sanctions against Hana Bank is likely to be reduced through acceptance of the dispute mediation committee's recommendation notified on this day. Relief efforts for victims are recognized as a reason for mitigating sanctions. Previously, Shinhan Bank, Woori Bank, and Industrial Bank of Korea, which accepted the dispute mediation plan, also had their CEO sanctions reduced in the sanction review.

Hana Bank is also likely to accept the dispute mediation committee's compensation decision, like other banks. Hana Bank is expected to announce its official position on accepting the dispute mediation committee's results as early as today or by the 15th at the latest. A Hana Bank official explained, "We plan to decide on acceptance after sufficient review and internal procedures."

The Board of Audit and Inspection's audit results, which pointed out that the FSS's management and supervision duties were inadequate regarding the private equity fund incident, are also expected to lower the level of sanctions in the sanction review. The Board of Audit and Inspection decided on severe disciplinary actions against the FSS staff for negligence during the supervision process of the private equity fund incident. Amid high public criticism of the FSS, if the FSS pushes forward with severe sanctions as originally planned, it is likely to face criticism both inside and outside the financial sector.

The ruling on the lawsuit filed by Sohn Tae-seung, chairman of Woori Financial Group, against the FSS to cancel the severe sanctions is also expected to have an impact. If Chairman Sohn wins the lawsuit, the FSS's burden will inevitably increase.

The final result of the sanction review for Hana Bank is expected after mid-August, considering the summer vacation season. A financial sector official said, "With the FSS commissioner position vacant, imposing severe sanctions on major financial companies could be a burdensome decision," adding, "If the dispute mediation committee's results are actively accepted, the level of sanctions is likely to be reduced."

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