Regarding the misselling of Hong Kong H Index equity-linked securities (ELS), the financial authorities keep delaying a final decision on the banking sector's penalty surcharge. In financial circles, the prevailing view is that no conclusion will come this month.
According to the financial authorities on the 19th, the Financial Services Commission is discussing whether to place the ELS sanctions agenda for five banks—KB Kookmin, Shinhan, Hana, NH Nonghyup, and Standard Chartered Bank Korea—on the regular meeting agenda on the 29th. Earlier, the Financial Services Commission did not place the Hong Kong ELS penalty surcharge item on the regular meeting scheduled on the 15th.
It is uncertain whether a final conclusion will be reached at the regular meeting on the 29th. The Financial Services Commission reviewed the related agenda after receiving it from the Financial Supervisory Service's Sanctions Review Committee in February, but it has not been able to conclude for more than two months.
The Financial Services Commission is said to have convened an agenda subcommittee and first reviewed financial firms with smaller sales volumes. In financial circles, there is also speculation that review on the five banks facing large penalty surcharges has not progressed to the point of a decision. In the end, the final conclusion is expected to slip past this month.
The financial authorities are reportedly weighing how much to reduce the penalty surcharges. The initial penalty surcharge calculated by the Financial Supervisory Service was about 4 trillion won. During subsequent discussions, it was reduced by half to about 2 trillion won and was pre-notified to the banking sector in Nov. last year. In Feb. this year, a penalty surcharge sanction plan of 1.4 trillion won, an even lower amount, was approved and sent to the Financial Services Commission (FSC).
The Financial Services Commission (FSC) is reportedly considering how much to recognize the banking sector's voluntary compensation efforts when setting the penalty surcharges. Under the revised Financial Consumer Protection Act (Financial Consumer Act) last year, the financial authorities can reduce penalty surcharges by up to 75% based on efforts to remedy victims.
There is also concern that excessive penalty surcharges could affect the Lee Jae-myung administration's policy to expand "productive finance." Inside and outside financial circles, there are expectations that the current 1.4 trillion won could be cut by at least 30% and be significantly lowered to the hundreds of billions of won range.
There is also concern that if the penalty surcharge of around 1.4 trillion won is finalized, the banking sector is likely to file a lawsuit against the financial authorities.