 |
IBK headquarters in central Seoul (Industrial Bank of Korea) |
South Korea’s market watchdog Financial Supervisory Service said Tuesday it has ordered the state-run Industrial Bank of Korea to compensate up to 80 percent of the losses from the lender’s misselling of problematic funds structured by Discovery Asset Management.
The dispute arbitration committee under the FSS set the reimbursement rate for individual investors, who signed up for Discovery funds through IBK, ranging between 40-80 percent, the FSS said in a statement.
The lender reportedly sold the troubled funds, including the Discovery US Fintech Global Bond Fund and the Discovery US Real Estate Senior Bond Fund, worth 361.2 billion won ($321.4 million) and 318 billion won, respectively, between 2017 and 2019. However, among them, funds worth more than 90 billion won have remained frozen since February 2019.
If the lender accepts the FSS‘ decision and embarks on a compensation process, a fund redemption worth an estimated 76.1 billion won is expected to take place.
The committee concluded that IBK is liable for damages incurred by the fund fiasco, saying, “The bank failed to adequately inform customers of its fund products‘ potential high risks.”
“(IBK) lacked internal controls to prevent the sale of risky fund products and monitor selling process.“
Under the current regulations, the FSS’ proposed dispute settlement is not legally binding, so if investors or banks do not accept the authority’s decision within 20 days in a gesture to refuse to settle, they may then undertake legal proceedings, officials said.
IBK is slated to consider whether to accept the FSS’ arbitration result, but no decision has yet been made, the bank said.
Possibilities remain high for the lender to embrace the authority’s reimbursement rate as its CEO Yoon Jong-won expressed his will to compensate victims’ losses.
“We will abide by the FSS’ dispute mediation procedure to minimize the losses suffered by customers due to the fund scandal,” Yoon said during a press conference held in February.
Meanwhile, the FSS plans to hold a series of dispute arbitration meetings for other Discovery fund sellers, including Shinhan Bank, Hana Bank, Korea Investment & Securities and IBK Securities, by the end of this year.
By Choi Jae-hee (
cjh@heraldcorp.com)
