CI 50% prepaid…’Enthusiasm’ to relieve consumer damage
“The grounds for severe disciplinary action are also poor… Concerns about contraction in business activities”
The lime fund’s second sanction review committee is drawing attention from the financial sector. In the financial sector, the claim that severe disciplinary measures for CEOs are excessive is gaining strength. The related regulations are also ambiguous, and banks’ efforts to relieve consumer damage should also be taken into account. Recently, the Federation of Banks also announced that excessive disciplinary action by the Financial Supervisory Service could undermine banking management.
On the 18th, the FSS Dispute Mediation Committee will hold a second sanction review committee for banks selling Lime Funds. Earlier, the Financial Supervisory Service held the first sanctions trial on the 25th of last month, but as the discussion about Woori Bank prolonged, the Shinhan Bank case could not even proceed.
In the first sanctions review, the Financial Supervisory Service’s Consumer Protection Department attended, emphasizing the efforts of selling banks to relieve consumer damage. In the second sanctions review, it is observed that Shinhan Bank will actively appeal to the efforts to relieve consumer damage.
Shinhan Bank decided to pay 50% of the principal for Lime Credit Insurance (CI) last year, and settle it afterwards when the compensation ratio is determined according to the decision of the FSS Dispute Mediation Committee. It has recently agreed to initiate a dispute settlement process for Lime Fund, whose loss has not been determined.
On the 17th, an official from the financial sector interpreted Shinhan Bank’s activities, saying, “It is still not enough to appease the victims, but the bank also took the risk of negligence and tried to relieve the damage.”
Earlier, the Financial Supervisory Service suggested that the disciplinary penalty could be reduced to financial companies actively engaged in remedies for consumer damage. Director Yoon Seok-heon said in an official ceremony recently, “We are working hard to reflect the reduction of sanctions to companies that do well in consumer protection.”
According to the data on the FSS Sanction Principles and Procedures related to the incomplete sale of private equity funds released last month by the Financial Supervisory Service, Article 23 of the Inspection and Sanction Regulations provides for post-response efforts, and Article 46 of the Inspection and Sanction Regulations Article 46 of the Detailed Regulations on Prosecutors and Sanctions Reduces or Exemption Efforts to Recover Damages. It is set as a reason for consideration.
Financial sector “Severe disciplinary punishment for CEO is excessive… The legal basis is ambiguous”
Industry insiders point out that “The finalization of severe disciplinary action against Shinhan Bank President Jin Ok-dong actually means withdrawal from the financial sector.” Usually, it is subject to severe disciplinary action above the censure warning. If severe discipline is confirmed, employment in the financial sector is restricted for 3 to 5 years.
Equity issues can also arise. In the Lime Fund sanctions trial, KB Securities’ CEO Park Jeong-lim was reduced from a job suspension to a censure warning, and Kim Do-jin, a former head of the Industrial Bank of Korea, was also reduced from a censure warning to a cautious warning.
From the perspective of financial companies, severe disciplinary action makes it difficult for them to enter new businesses that require permission from the authorities for the next one year. The current law temporarily suspends the procedures such as licensing, etc. if there are sanctions by the financial authorities on the majority shareholder. It is intended to be a high level of ethics for the major shareholders of financial companies.
The reason that Kakao Pay was not approved by the financial authorities for its own credit information management business (My Data) is because the eligibility of China’s Ant Group, the second largest shareholder, has been hindered.
Some observers say it may be difficult for financial company CEOs to accept the sanctions decision by the authorities. Some people are asking, “In the case of the private equity crisis, FSS officials are involved, and in Lime’s case, there is an original sin that the authorities could not respond quickly even if the authorities knew the facts. Is there a reason to discipline the CEO of a financial company?”
An official in the financial sector pointed out, “If a large number of financial companies engage in a court battle against the financial authorities, it is difficult for the authorities to be free from responsibility due to market turmoil.”
In addition to this, he pointed out that there are areas that are not clear in the legal world regarding the grounds for severe disciplinary action by the FSS’s CEO. The FSS’s severe disciplinary grounds for the CEO of the Financial Supervisory Service are: Article 24 Internal Control Standards of the Financial Company Governance Structure Act, 19 Enforcement Ordinance Article 19 internal control standards, etc., but the’standard’ of internal control is not clear here.
One legal official said, “There is already a sharp controversy over whether the Financial Supervisory Service’s internal control standards can be the basis for severe disciplinary action by the CEO.”
Bank Federation Chairman Kim Kwang-soo, a former high-ranking financial official, said at a press conference on the 100th of the recent inauguration as if he was conscious of the public opinion of the banking sector. “The disciplinary action of the financial authorities is far from the’principle of clarity’, which is the basic position of the Legislative Office and the court.” There is a high concern that the bank’s business activities will be increased and the bank’s business activities will be reduced.”
An official from Shinhan Bank said, “We will put customer protection as a top priority and work faithfully in future procedures such as sanctions review and subcommittee.”
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