The Financial Supervisory Service decided to impose a penalty surcharge of about 1.4 trillion won on banks over the misselling of Hong Kong H-share Index equity-linked securities (ELS). Sanctions on institutions were downgraded by one level, from partial business suspension as initially considered to an institutional warning.
According to the financial authorities on the 12th, the Financial Supervisory Service (FSS) convened the third sanctions review committee (sanctions committee) at 2 p.m. the same day over the misselling of Hong Kong H-share Index ELS and set the penalty surcharge on banks at about 1.4 trillion won.
Those subject to sanctions are KB Kookmin, Shinhan, Hana, NH Nonghyup, and Standard Chartered Bank Korea. Sanctions on the institutions and responsible executives were also mitigated. Earlier, the Financial Supervisory Service (FSS) had imposed heavy sanctions of "partial business suspension" on the banks and a "reprimand warning" on responsible executives.
This penalty surcharge was adjusted to a level about 15% lower than the approximately 2 trillion won the FSS had pre-notified. By bank, based on sales amounts, KB Kookmin Bank is 1 trillion won, Shinhan Bank 278 billion won, Hana Bank 320.4 billion won, NH Nonghyup Bank and Standard Chartered Bank Korea 194.2 billion won and 140 billion won, respectively. The total is 1.9326 trillion won.
However, the adjustment was more conservative than the level of mitigation the financial sector had expected. The FSS had set a policy to also consider banks' "compensation efforts," such as post-crisis remediation, leading the sector to expect a reduction of up to 75%.
The sanctions review process proceeds in the order of ▲ prior notice ▲ holding the sanctions review committee ▲ deciding the level of sanctions ▲ final notification of sanctions. After the committee review, the final size of the penalty surcharge is confirmed by resolutions at the Securities and Futures Commission of the Financial Services Commission and the Financial Services Commission's regular meeting.