"'Uri' Initiated 'Voluntary Compensation', Banks Hold Consecutive Board Meetings... Cautious About 'Total Compensation Ratio'"

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Woori Bank has become the first in the banking sector to accept the Financial Supervisory Service's proposed dispute resolution plan for the Hong Kong H-Index equity-linked securities (ELS). However, it maintained a cautious stance regarding the total compensation ratio. Having accepted the dispute resolution plan, Woori Bank plans to contact subscribers and begin guidance.

On the 22nd, Woori Bank held a board meeting at its headquarters in Jung-gu, Seoul, and decided to start compensating subscribers whose contracts mature from April. Major commercial banks were the first to accept the dispute resolution plan proposed by the Financial Supervisory Service. Woori Bank's outstanding sales balance of Hong Kong ELS stands at 41.5 billion KRW, which is considered a lighter burden for the board resolution compared to other commercial banks with sales volumes reaching trillions of KRW.

A Woori Bank official explained, "Taking proactive voluntary adjustment measures is aimed at resolving investors' uncertainties before the ELS maturity and protecting investors," adding, "We will use this as an opportunity to further enhance investor-centered asset management services."

Accordingly, Woori Bank plans to contact subscribers whose contracts mature on April 12 (approximately 4.3 billion KRW) as early as next week to explain the compensation criteria and procedures. Once individual consultations with subscribers are completed, the bank intends to pay compensation within a week.

However, the bank took a cautious position regarding the overall compensation ratio. The banking sector estimates that Woori Bank's compensation scale will fall short of 10 billion KRW. A Woori Bank representative stated, "We will follow the Financial Supervisory Service's standard plan, but since there are many factors to consider for each investor and individual consultations are necessary, it is currently difficult to estimate specifics."

As Woori Bank has decided through its board meeting to be the first to undertake voluntary compensation based on the Financial Supervisory Service's dispute resolution standards, other banks also plan to hold extraordinary board meetings in succession to discuss voluntary compensation plans. Hana Bank, with sales volume of 2 trillion KRW, is scheduled for the 27th, while NH Nonghyup Bank with 2.2 trillion KRW and SC First Bank with 1.2 trillion KRW in sales volume have extraordinary board meetings planned for the 28th.

Although dates have not been set, Shinhan Bank and KB Kookmin Bank also plan to hold extraordinary board meetings as soon as their internal reviews are completed. KB Kookmin Bank's sales volume reaches 7.8 trillion KRW, and Shinhan Bank's sales volume is 2.4 trillion KRW. Given the large sales volumes, internal reviews are expected to take considerable time.

Compared to Woori Bank, other banks face a much greater burden regarding total compensation amounts. Since the banking sector estimates Woori Bank's compensation ratio at around 40%, the compensation amounts for other commercial banks such as KB Kookmin, Shinhan, NH Nonghyup, Hana, and SC First could range from hundreds of billions to trillions of KRW. Moreover, it is known that Woori Bank's board judged that accepting the Financial Supervisory Service's dispute resolution plan would not raise issues of breach of trust, which has reportedly increased concerns among other banks. Financial authorities have repeatedly stated that they do not understand the 'breach of trust issue' that banks are worried about.

Meanwhile, the Financial Supervisory Service set the basic and common compensation ratios for the banking sector between 23% and 50%, depending on the degree of violation of sales principles such as suitability, duty to explain, and prohibition of unfair solicitation. The maximum compensation ratio can reach up to 100%, but most are expected to fall within the 20% to 60% range. In particular, the Financial Supervisory Service announced that it would strictly take action against illegal acts by sales companies but would consider efforts made for post-incident remediation, recommending prompt voluntary compensation.

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