Lee Bok-hyun Bowing His Head: "Apologies for the ELS Incident... No Embezzlement Issues"

Lee Bok-hyun, Governor of the Financial Supervisory Service

Lee Bok-hyun, Governor of the Financial Supervisory Service, bowed his head and apologized, saying "We are sorry to the public" regarding the large-scale loss incident involving Hong Kong H Index (Hang Seng China Enterprises Index·HSCEI) based equity-linked securities (ELS).

On the 13th, after the 'Open Discussion with Individual Investors' held at the Korea Economic Association Conference Hall in Yeouido, Seoul, Governor Lee met with reporters and said, "We apologize for causing pain and inconvenience due to the supervisory authorities not thoroughly addressing incomplete sales," adding, "We also regret that the trust in banks and securities firms was damaged because we could not present clear standards."

Governor Lee expressed his position regarding voluntary compensation by sales companies under the dispute mediation guidelines, stating that it is "far from breach of trust."

He explained, "The dispute mediation guidelines were prepared by selecting factors recognized by precedents to achieve judicial results equivalent to those obtained through judicial procedures without going to court, thus having a legal basis. Having worked on breach of trust-related tasks for over 20 years, sharing the burden with consumers is a distant matter from breach of trust issues."

Regarding institutional improvements, he said, "We are communicating with the Financial Services Commission about measures such as linking employee performance evaluations to customer benefits," and added, "Within this month, we will form a task force (TF) involving authorities, industry, academia, and consumers to produce visible results within the year."

On the differences from the dispute mediation guidelines during the derivative-linked fund (DLF) incident, Governor Lee said, "In the past, minimum and maximum compensation ratios were set, which seems to have considered swift mediation rather than individual cases," and added, "This time, the guidelines comprehensively considered factors related to damages liability for illegal acts recognized by courts and damage calculation."

He continued, "DLF has a structure where 80-90% of the principal is lost, so even if financial companies bear 70-80%, individuals still suffer 20-30% losses," and added, "Since ELS retains 50% of the principal, if the loss-sharing ratio is 40-60%, actually 75% of the principal remains, and the loss ratio borne by individuals can be 20-30%."

Regarding concerns that the asset soundness of sales companies might deteriorate, he said, "There is no problem as it is a one-time factor." He explained, "The Basel III (BIS) capital adequacy ratio regulation for banks is 8%, but as of the end of last year, the five major commercial banks had 15.31%. For example, if a cost burden of over 1 trillion won is required, it would cause about a 0.2 percentage point drop in the BIS ratio," adding, "Despite reflecting win-win finance of about 1.3 trillion won and additional reserve accumulation in the financial statements at the end of last year, net income was better than the previous year." He further added that there is no problem with the shareholder-friendly policies the government is promoting.

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