FSS expected to punish commercial bank heads
Derivative-linked funds (DLF) have been a jargon, which only a few experts use. But the hard-to-understand financial products have become a household name in Korea over the past few months.
DLF is a high-risk, complex product designed to track the performance of underlying assets like stocks and bonds.
The derivative products have caught the country by storm because they are feared to incur more than $300 million losses to investors here with some of them being senior citizens.
KEB Hana Bank and Woori Bank are suspected of mis-selling a substantial portion of the products, which prompted the country’s financial watchdog to investigate the two lenders in August.
The Financial Supervisory Service (FSS) targeted the two because they have sold the most products. The financial regulator also looks into asset management companies and brokerages involved in structuring and selling DLF.
The FSS is set to finish the two month-long probes this week and heads of the two banks are feared to face severe penalties.
They are KEB Hana Bank CEO Ji Sung-kyoo, Hana Financial Group Vice Chairman Ham Young-joo, who is also Ji’s predecessor, and Woori Bank CEO Son Tae-seung.
It remains to be seen how severe the punishment would be. Observers are split into two opposing camps over whether the three will be able to keep leading the two lenders.
Attracting more attention is KEB Hana chief Ji because he is suspected of having ordered his men to delete DLF-related data just ahead of the FSS inspection.
The FSS appears to believe that at least Ji had knowledge of the problematic measure. If so, Ji is predicted to face big troubles.
On top of the three executives, KEB Hana Bank and Woori Bank are highly likely to face separate punishments.