In the afternoon of the 25th, the Financial Supervisory Service Sanctions Deliberation Committee proposed an inspection measure for the Woori Bank division, a Lime Fund seller, and discussed the level of sanctions.
After the Woori Bank sanctions review is over, Shinhan Bank and Shinhan Financial Group will be discussed in turn.
Lime Asset Management Concerns about massive investment loss (PG)▶ Click here to enlarge
Woori Financial Group Chairman Son Tae-seung, who was the head of Woori Bank at the time of the Lime crisis, directly attended the sanctions trial on this day.
The Financial Supervisory Service notified Son of severe disciplinary action equivalent to suspension of work.
Shinhan Bank President Jin Ok-dong was informed of a censure warning in advance.
The level of sanctions against financial company executives is divided into five stages: recommendation of dismissal, suspension of work, reprimand warning, cautious warning, and caution. Among them, censure warnings and above are classified as severe disciplinary action restricting employment in financial companies for 3 to 5 years.
It is known that the Financial Supervisory Service has imposed severe disciplinary action for taking responsibility for incomplete sales.
In the Woori Bank sanction review, the issue is whether the company continued to sell its products even after the Lime Fund was recognized in advance.
Woori Bank strongly denies prior recognition, but the Financial Supervisory Service seems to have recognized the possibility of Woori Bank insolvency.
On April 9, 2019, Woori Bank stopped launching new products for Lime Fund.
Some argue that Woori Bank continued to sell the funds reserved for fees until April 30, even though it recognized the fund’s insolvency for a month before the launch was stopped.
In the case of Shinhan Bank’s sanctions review, fierce battle between the Financial Supervisory Service and the bank is expected over whether the CEO can even punish the CEO for poor internal control.
The Financial Supervisory Service has a logic that it can impose sanctions on management based on the laws and enforcement ordinances on the governance structure of financial companies, stating that “there should be an effective internal control standard in the process of developing and selling new products”.
Shinhan Bank is expected to contend that the provisions of the law mean’financial companies should set up internal control standards’, but are not a direct basis for imposing sanctions on management in the event of a financial accident.
In the case of Chairman Son, the issue of internal control is not addressed in the sanctions review, as he cannot “double sanctions”. This is because Chairman Son was severely punished for inadequate internal control during the Derivatives-Linked Fund (DLF) crisis.
Shinhan Financial Group is also subject to sanctions.
The Financial Supervisory Service is known to have made a problem with the Shinhan Financial Group’s “matrix system”.
Shinhan Bank and Shinhan Investment Corp. believe that Shinhan Financial Group is responsible for managing the complex store operation in the process of selling lime funds at complex stores.
For this reason, Cho Yong-byung, chairman of Shinhan Financial Group, was notified in advance of a cautious warning, which is a hard discipline.
Financial authorities sanctions against private equity in banknotes (PG)▶ Click here to enlarge
In this sanctions hearing, the Financial Supervisory Service (Financial Consumer Protection Office) was the first to appear as a reference to express opinions on Woori Bank’s consumer protection measures and efforts to relieve damage.
It is reported that Woori Bank has made efforts to deal with damages, such as accepting the dispute settlement proposal by the FSS and agreeing to hold a dispute settlement committee for funds with unconfirmed losses.
It is noteworthy whether Woori Bank will be the first case of sanctions being reduced in recognition of its efforts to protect consumers during the sanctions review stage.
The agency will not attend the Shinhan Bank sanctions review.
Although Shinhan Bank decided to pay 50% of the principal in advance, it is difficult to believe that it has made sufficient efforts to protect consumers with only the advance payment that provides liquidity.
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