The outline of the Financial Supervisory Service's sanctions over misselling of Hong Kong H-share index equity-linked securities (ELS) by banks is expected to come out this month. Because the schedule has been delayed by about two weeks from expectations, anticipation is growing in the banking sector for a reduction in the level of sanctions.
According to the financial sector on the 19th, the Financial Supervisory Service (FSS) is said to be convening the second sanctions review committee (sanctions review) around the 29th of this month over the misselling of Hong Kong ELS. The Financial Supervisory Service (FSS) plans to discuss the level of sanctions on banks and the size of the penalty surcharge at this review.
As no conclusion was reached at the first sanctions review held in Dec. last year, the financial sector expects the second review to provide an outline of the level of sanctions and the penalty surcharge. The Financial Supervisory Service (FSS) had originally planned to hold the second Hong Kong ELS sanctions review on the 15th but postponed the schedule. The Financial Supervisory Service (FSS) is said to have made this decision because further review of the sanction agenda was needed.
A financial industry official said, "Even if a final conclusion is not reached at the second review, I think the direction—whether to maintain the penalty surcharge or to reduce it—will be set."
In Nov. last year, the Financial Supervisory Service (FSS) gave prior notice of measures on penalty surcharges and fines related to misselling of Hong Kong ELS to five banks, including KB Kookmin Bank, Shinhan, Hana Bank, NongHyup, and Standard Chartered Bank Korea. The total penalty surcharge is around 2 trillion won, with KB Kookmin Bank at about 1 trillion won and Shinhan and Hana Bank at about 300 billion won each.
At the first review, the banking sector emphasized that it had actively pursued post-damage measures such as voluntary compensation. Under the Financial Consumer Protection Act, if efforts to recover post-damage are recognized, the penalty surcharge can be reduced by up to 50%.
With the sanctions review schedule pushed back, expectations are growing in the banking sector that the Financial Supervisory Service (FSS) may be considering easing the penalty surcharge. The Financial Industry Union, the umbrella group for bank labor unions, also visited the presidential office and the Democratic Party to call for reduced sanctions. Because the Democratic Party and the financial union form policy alliances every election, some in the ruling bloc say there is no need to provoke the banking sector ahead of the June local elections.
The level of sanctions on financial firms is finalized following resolutions at the regular meetings of the Securities and Futures Commission and the Financial Services Commission.