Financial Supervisory Service promotes sanctions for chairman of Shinhan Holdings… We spread as one

Input 2021.01.21 10:00

Shinhan Financial Group is deeply involved in Lime financing
Woori Bank and Hana Bank each investigated the late investigation as Lime Optimus

Banks related to the private equity crisis such as Lime and Optimus are fully affirmed as the Financial Supervisory Service has made a position to ask Shinhan Financial Group and Chairman Cho Yong-byeong of Shinhan Financial Group about the liability for incomplete sales of Lime Asset Management Fund (hereinafter referred to as Lime Fund) .

According to the financial industry, the Financial Supervisory Service is preparing sanctions, including disciplinary action against Chairman Cho, as the financial holding company has neglected the responsibility of managing and supervising Shinhan Investment and Shinhan Bank’s loss to investors by selling Lime Fund.

There are two main reasons why the Financial Supervisory Service has decided to hold Cho to account for it. First, there are many lime-related products sold by Shinhan Bank and Shinhan Financial Investors, and there is a large possibility of incomplete sales. The Lime Fund sold by Shinhan Investment and Shinhan Bank is KRW 60.2 billion. This accounts for 36.1% of the total redemption cessation funds (1,6680 billion won).

The second reason is that Shinhan Financial Group was deeply involved in Lime’s financing and manipulation of returns. According to a survey by the Financial Supervisory Service, Shinhan Investment Corp. not only provided funds to Lime’s trade finance fund through TRS (Total Revenue Swap) leverage, but also did not inform investors of the fact that it was aware of the occurrence of insolvency and manipulation of returns. This is why the Financial Supervisory Service notified the prosecution of both Lime and Shinhan Investment Corp. on charges of fraud and denunciation.

Regarding the FSS’s position, commercial banks such as Woori Bank and Hana Bank are keenly aware of whether the entire financial group will be subject to private equity sanctions. One bank official explained, “If the Financial Supervisory Service sees that the financial group as a whole is responsible for the private equity crisis such as Lime and Optimus, there is a risk that other banks will be similarly problematic.”

In the case of Woori Bank, in December of last year, the prosecution summoned and investigated the former head of the sales division (the vice-president level) A and the former head of the asset management (WM) group (the vice-president), respectively. Earlier, Yoon Gap-geun, chairman of the Chungbuk Provincial Party’s Power of the People (formerly Daegu High Prosecutor’s Office), was arrested on charges of receiving about 200 million won from Lime for lobbying Woori Bank.

In the case of Hana Bank, when the Optimus Fund is insolvent and threatened to stop repurchases, there are suspicions of “blocking the fund back,” which draws funds from completely separate funds and redeems them. If the suspicion is true, it means that the fund’s trustee has been involved in fraud.

According to the prosecution, key officials of Optimus stated that it was in August 2018 that Optimus was unable to return investment funds to investors, but the reason for the suspension of redemption from June 2020 was due to financial support from Hana Bank. Based on these statements, the prosecution is known to have been investigating the head of Hana Bank’s entrusted management department as a suspect in October last year.

In addition, it is known that Optimus used an unknown unlisted company to freely return the funds through the trustee bank Hana Bank. This is also an issue that Hana Bank recognized in advance. In the end, according to the prosecution’s investigation, Hana Financial Group is likely to receive severe punishment from the Financial Supervisory Service, similar to Shinhan Financial Group.