Financial Services Commission Chairman on Bank ELS Sales Ban Demand: "All Risky... Comprehensive Review Underway"

On the 29th, Kim Ju-hyun, Chairman of the Financial Services Commission, responded to a question about whether the sale of equity-linked securities (ELS), classified as high-risk products by banks, should be suspended by saying, "We will comprehensively review and consider it."

Financial Services Commission Chairman Kim Ju-hyun and Financial Supervisory Service Chairman Lee Bok-hyun are attending the National Assembly's Political Affairs Committee on the 29th, reviewing documents. Photo by Kim Hyun-min kimhyun81@

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Chairman Kim appeared at the plenary session of the National Assembly's Political Affairs Committee that morning and stated in response to a question from Lee Yong-woo, a member of the Democratic Party of Korea, regarding the suspension of ELS sales, "Not only ELS but all financial investment products carry risks."

Rep. Lee first pointed out, "During the national audit four years ago, I highlighted that option selling is an infinitely risky product, so it is problematic for banks to sell it to individuals; it should be sold only to PBs or institutions. Although the Financial Services Commission and the Financial Supervisory Service pointed out the moral hazard of banks, they have effectively not supervised it for four years. Therefore, ELS sales by banks should be suspended now, and at the very least, there should be a provision in the law allowing customers to claim damages in cases of incomplete sales."

In response to the same question, Lee Bok-hyun, Governor of the Financial Supervisory Service, said, "I agree with Chairman Kim's remarks," adding, "Even for the same high-risk products, depending on whether the structure is simple or complex, we will take this opportunity to consider which sales channels are appropriate for actual consumer protection."

Regarding the criticism from the government and ruling party since last year about the enormous interest income of banks leading to the sale of financial products like ELS, Chairman Kim replied, "ELS sales have been occurring for several years already, and the criticism of net interest margin has been ongoing since last year."

The financial authorities also stated that they plan to complete the on-site investigation and results related to ELS by next month. In response to a question from Democratic Party lawmaker Kang Hoon-sik about banks' own measures to prevent incomplete sales, Rep. Lee said, "At this stage, it is premature to mention specific banks or cases," adding, "We are currently deploying various resources to conduct inspections and aim to complete them by February."

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