Lee Chanjin Signals "Hong Kong ELS Fines to Drop Below 1 Trillion Won"... Will Sanctions on Banks Be Reduced?

FSS Begins Reassessment of 1.4 Trillion Won Sanction Proposal
FSC Unusually Requests Review, Citing Need to Supplement Legal Reasoning and Facts
Banking Sector Watches Closely for Final Reduction and Whether Institutional Warnings Remain

Lee Chanjin, Governor of the Financial Supervisory Service (FSS), has suggested that the scale of fines imposed on banks in connection with the incomplete sales of ELS products linked to the Hong Kong H Index (HSCEI) may be significantly lower than the previously announced 1.4 trillion won. This is the first public statement since the Financial Services Commission (FSC) returned the sanction proposal to the FSS, raising the likelihood that the final level of sanctions will be lower than initially expected.

Yonhap News Agency

On May 15, after the '2026 Financial Supervisory Advisory Committee Plenary Meeting' held at the Bankers Club in Jung-gu, Seoul, Governor Lee told reporters regarding the ELS incomplete sales sanction proposal, which the FSC requested to be reviewed, “The fines will not be in the trillion-won range.” When asked whether the fines would drop below 1 trillion won, he reiterated, “They will go down.”

Governor Lee added, “We aim to finalize the details and pass them by the end of May. However, there could be a delay of about two weeks.” This suggests that the FSS intends to adjust the scale of fines for ELS incomplete sales within this month and resubmit the sanction proposal to the FSC.

The FSC received the sanction resolution proposal for the banking sector from the FSS in February. At that time, the FSS’s sanction review committee resolved to impose total fines of 1.4 trillion won and institutional warnings on five banks: KB Kookmin Bank, Shinhan Bank, Hana Bank, NH Nonghyup Bank, and Standard Chartered Bank Korea.

However, the FSC held three regular meetings but failed to reach a conclusion, and at the meeting on May 13, it unusually returned the relevant agenda to the FSS. This is the first time in about eight years that the FSC has asked the FSS to review a major sanction case, the last being the Samsung BioLogics accounting standards violation case in 2018.

At that time, the FSC explained, “We requested the FSS to supplement certain facts as well as the applicable laws and legal reasoning.”

Analysts believe that the FSC’s cautious approach is influenced not only by the symbolic significance of this being the first major sanction since the enforcement of the Financial Consumer Protection Act, but also by the recent series of administrative lawsuits in which the financial authorities have lost to financial companies.

Accordingly, the possibility of “super-large fines in the 1 trillion won range,” which had initially concerned the banking sector, is expected to decrease significantly. However, attention is now focused on whether the institutional warnings will be maintained and by how much the final fines will be reduced.

Regarding Governor Lee’s remarks, the FSS stated, “In accordance with the FSC’s request, we are supplementing certain facts and the applicable laws and legal reasoning in the ‘Hong Kong H Index ELS Incomplete Sales-Related Sanctions Proposal for Banks and Securities Firms.’ The specific scale of fines has not been finalized and will be determined at a future FSC regular meeting.”

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