FSS: "No Problem If Banks Had Internal Controls and Sold ELS"

Lee Junsu Vice Director "There Will Be Various Issues Including Sales Suitability"

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Lee Junsu, Deputy Governor of the Financial Supervisory Service's Banking and Small Business Division, recently commented on the possibility of banks incurring large-scale losses starting January next year after selling Hong Kong H-Index-linked Equity-Linked Securities (ELS). He stated, "If banks sold these products while maintaining proper internal controls, I believe there is no problem."

At the 'Banking and Small Business Division Major Issues Press Briefing' held on the 30th, Deputy Governor Lee said, "There are several issues to consider, such as whether investors fully understand the risk of losses due to the volatility of the Hong Kong H-Index and whether it is appropriate to sell to investors who might suffer significant losses despite the low probability because they do not understand the risks well."

He added, "Even after the past DLF incident, although there was much debate about a complete ban, the direction was set to sell within limits, strengthening the regulatory framework under the Capital Markets Act and the Financial Consumer Protection Act," and said, "It is difficult to say that banks should stop selling ELS products."

Lee also noted, "In the case of KB Kookmin Bank, it accounts for nearly half of the total sales of Hong Kong H-Index-linked ELS. While other banks have focused on private equity funds, KB Kookmin Bank seems to have concentrated on ELS."

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