Senior Deputy Governor Lee Se-hoon of the Financial Supervisory Service said the agency will respond strictly to accidents caused by the misselling of financial products by imposing a penalty surcharge on financial firms without considering mitigating factors.
Lee said this while meeting with reporters at a briefing on the 1st Consumer Risk Response Council held on the 20th. Lee said, "Given that this Hong Kong equity-linked securities (ELS) incident comes at an early stage of the Financial Consumer Protection Act (FCPA), we are considering a reduction of the penalty surcharge, but if the same situation occurs in the future, we will not consider any reduction."
The Financial Supervisory Service (FSS) gave prior notice of about 2 trillion won in penalty surcharges, saying commercial banks missold ELS tracking the Hong Kong H index, and it was later lowered to about 1.4 trillion won.
Lee said the agency is checking whether consumer protection is being properly ensured as financial firms sell investment products. "Recently, sales of equity-linked products such as exchange-traded funds (ETF) have been increasing in the banking sector, and there have been concerns that consumer harm could occur in the course of sales competition," Lee said. "We are monitoring the size of ETF products sold by banks and elsewhere, and the related figures have also been compiled."
Lee added that if the agency determines an IT security incident at a financial firm occurred due to lax management, it will not consider mitigating factors for fines. "We view recent security incidents in the financial sector as stemming from poor management," Lee said. "When multiple security incidents are combined, there are mitigating factors such as imposing fines at up to 10 times the statutory cap, but if we determine the incident was clearly due to mismanagement, we intend to minimize reductions."
Lee went on to say, "There are discussions underway on whether it is necessary to curb the pace of the increase in 'debt-fueled investing.' We are broadly reviewing stock loans offered by smaller nonbank lenders along with general unsecured loans, as well as bank overdraft loans."