Woori, Hana slapped with fine, 6-mo ban on fund sale for DLF mis-selling

South Korea’s major commercial banks Woori Bank and Hana Bank are slapped with hefty fines and a six-month ban from selling private equity funds for mis-selling high-risk derivative-linked funds (DLFs) that have caused massive losses to investors.

The Financial Services Commission (FSC) on Wednesday announced it has made a final decision to fine Woori Bank 19.71 billion won ($16.62 million) and KEB Hana Bank 16.78 billion won, as well as ban them from selling private equity funds for the next six months as the punishment for the two banks’ reckless sale of exotic derivative products.

Woori Bank and Hana Bank are accused of selling high-risk derivative-linked funds (DLFs) tied to 10-year German Treasury bond to mostly elderly and novice investors without fully explaining on potential risks of the products and causing them massive losses.

In addition, the disciplinary measures determined by the FSS for Woori Financial Group Chairman Son Tae-seung and Hana Financial Group Vice Chairman Ham Young-joo will be carried out as proposed by the FSS.

As a result, the top officials of the two commercial lenders will receive a “reprimand” warning, the third heaviest in the five-level punishment system.

Son is expected to file an administrative suit to prevent the FSC’s punitive measures against him taking effect as he is set to be reappointed as chairman at the bank’s shareholder meeting due on March 25. If a court injunction is granted before then, Son will be able to continue his leadership role.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]