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2 banks face penalty over product misselling fiasco

All News 13:47 March 04, 2020

SEOUL, March 4 (Yonhap) -- South Korea's financial regulator on Wednesday approved a penalty on two major lenders -- Woori Bank and Hana Bank -- over improper selling of derivatives-linked products.

The Financial Services Commission imposed a penalty of 16.78 billion won (US$14.1 million) on Hana Bank and 19.71 billion won on Woori Bank.

The commission also banned the two commercial banks from selling private equity funds for six months.

The move came more than a month after the Financial Supervisory Service, the country's financial watchdog, decided to ask the commission to impose a penalty on the two banks and suspend some of their operations for six months.

The FSS has said the local banks may have missold the products by failing to provide adequate information or explain the high risks involved to their consumers, telling the heads of the two lenders in advance that they may face "serious" disciplinary actions.

2 banks face penalty over product misselling fiasco - 1

The financial watchdog has recommended that the two local banks provide compensation for up to 80 percent of their customers' losses from the misselling of derivatives linked to overseas interest rates.

Since August last year, financial authorities have probed Woori Bank, Hana Bank, brokerage firms and asset managers that sold the derivatives-linked products.

The so-called derivatives-linked fund (DLF) products were designed to return large profits when the interest rates of specific countries, including Britain and Germany, stayed above a certain level.

Many South Korean consumers have reported losses of almost all of their investments after interest rates or bond yields in the major economies plunged.

In the case of certain derivatives linked to 10-year German state bond yields, some investors lost 98 percent of their principal after bond yields in Germany unexpectedly sank.

entropy@yna.co.kr
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