The Financial Industry Labor Union, the umbrella group for bank labor unions, recently visited the presidential office and the Democratic Party of Korea to ask for a from-scratch review of the penalty surcharge for the misselling of Hong Kong H-index equity-linked securities (ELS). It is seen as an attempt to pressure politicians to reduce the roughly 2 trillion won penalty surcharge. The Democratic Party of Korea and the financial labor union formed a policy alliance in last year's presidential election.
According to the financial sector on the 14th, the Financial Supervisory Service will reportedly not put the agenda on sanctions for the misselling of Hong Kong ELS by commercial banks on the docket at the Sanctions Review Committee meeting on the 15th. A second review was expected on the 15th following the first sanctions review on the 18th on the previous month, but the schedule has been postponed.
At the end of last year, the Financial Supervisory Service gave prior notice to five banks—KB Kookmin Bank, Shinhan Bank, Hana Bank, NongHyup, and Standard Chartered Bank Korea—of planned measures imposing a penalty surcharge and fines totaling as much as 2 trillion won in connection with the misselling of Hong Kong ELS. The penalty surcharge is estimated at about 1 trillion won for KB Kookmin Bank and in the 300 billion won range each for Shinhan Bank and Hana Bank.
With the Financial Supervisory Service delaying the schedule for the second sanctions review, attention is focusing on the background. The financial labor union is said to have recently met in turn with Lee Jeong-moon, a Democratic Party of Korea lawmaker on the National Policy Committee, and Kim Byung-wook, the presidential office's senior secretary for political affairs, to convey its position on the Hong Kong ELS penalty surcharge. The union reportedly requested a from-scratch review of the penalty surcharge, clarification of violations subject to sanctions, and reductions in the penalty surcharge reflecting voluntary compensation performance. Kim, formerly the union head at the Korea Securities Dealers Association (now the Korea Financial Investment Association), was also active in the Financial Industry Union.
The financial sector is taking the postponement of the Financial Supervisory Service's sanctions review schedule as a positive sign. Banks explained at the first review that they had made post-facto efforts such as voluntary compensation, and some interpret the delayed schedule as the financial authorities taking that into account. Banks that sold Hong Kong ELS had carried out voluntary compensation reaching 96.1% as of the end of June last year.
A financial industry official said, "We explained at the first sanctions review that we had worked toward voluntary compensation, and we expect those efforts to be reflected in reductions to the penalty surcharge."