[2022 National Audit] Director Lee Bok-hyun "Will Inspect the Actual Conditions of Currency-Related Products"
Financial Supervisory Service Governor Lee Bok-hyun appeared at the National Assembly's audit of the Financial Supervisory Service held on the 11th and responded to lawmakers' questions. Photo by Yoon Dong-joo doso7@
View original image[Asia Economy Reporters Song Hwajeong and Song Seungseop] Lee Bokhyun, Governor of the Financial Supervisory Service, stated that they will inspect currency-related products such as Target Redemption Forward (TRF) to ensure that issues similar to the past KIKO (Knock-In Knock-Out) incident do not occur.
At the National Assembly's Political Affairs Committee audit on the 11th, Lee Yongwoo, a member of the Democratic Party of Korea, pointed out, "In the past, KIKO was sold as a currency hedge product that appeared to have no costs despite incurring expenses, causing enormous damage to companies. Currently, similar products to KIKO are still being sold. Since 2019, TRF contracts worth 22 trillion won have been sold. According to the product description, the bank's margin is included in the customer exchange rate, and customers are not charged additional fees, which is similar to the no-margin situation during KIKO. This wording may mislead consumers into thinking there are no costs."
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Governor Lee responded, "KIKO was actually traded for speculative purposes without exposure to the underlying asset, but unlike KIKO, TRF is traded within limits for export companies that have currency exposure, and leverage trading is prohibited to prevent additional leverage. The structure offsets profits generated in the spot market with TRF losses, managing within the currency risk exposure limit." He added, "I agree with the criticism regarding whether financial institutions adequately informed customers about fees, and we will inspect matters related to the operation of TRF products." Governor Lee also stated, "As there are various issues related to currency and an increase in currency-related product transactions, we will thoroughly inspect the actual conditions to ensure there is no consumer harm."
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