FSS probes financial firms over sales of retirement pensions

The Financial Supervisory Service has launched a full-fledged investigation into 58 financial firms for their allegedly irregular sales of retirement pension products.

“The 58 firms which sell retirement pensions are composed of commercial banks, insurance companies and brokerage houses,” the FSS said in a statement. “Their overheated competition and irregularities will closely be examined.”

As the retirement pension market has swiftly expanded over the past few years, many financial firms are suspected of engaging in inappropriate sales practices when they simultaneously attract salaried customers of enterprises, according to the financial regulator.

Some financial firms allegedly pressured corporate customers ― small- and mid-sized enterprises, in particular ― to purchase a retirement pension product against their will in exchange for endorsing the SMEs’ loan applications.

Regulatory officials said that financial firms were seeking high returns on operating funds based on retirement pension reserves.

The retirement pension reserves reached 54.9 trillion won ($49.9 billion) as of August 2012, compared with 49.9 trillion won at the end of 2011, 29.5 trillion won at the end of 2010 and 14 trillion won at the end of 2009.

The number of individual customers of the products also set an all-time high of 3.93 million in August, surging over the past five years while the number stood at 538,000 at the end of 2007.

Commercial banks account for nearly half of the market with their share standing at 49 percent, followed by life insurance companies with 25 percent, securities firms with 18 percent and others with 8 percent.

“Though market interest rates stay below 3 percent, some financial firms are offering 3 percent to 4 percent rates based on their fund transfer prices ― not on deposit rates ― amid the keen competition,” said an FSS official.

By Kim Yon-se (kys@heraldcorp.com)