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Financial Supervision Service, KIKO ‘Incomplete Sales’ (PG) Regulation▶ Click here to enlarge
Shinhan Bank decided to compensate some damaged companies in connection with the currency derivative KIKO, which has been in dispute for more than 10 years.
Shinhan Bank announced that it had made this decision by holding an interim board of directors on the morning of the 15th.
Shinhan Bank explained: “We have no legal responsibility for the Kiko dispute, but we decided to compensate taking into account the social role as a financial company and the reality of small and medium-sized companies in recent difficult situations.”
However, it did not reveal the number of damaged companies or the level of compensation to be paid.
A Shinhan Bank official said: “The standard of compensation was determined by referring to the existing judgment of the Supreme Court and the legal opinions of outside experts, such as lawyers, and thoroughly considering the situation of individual companies.” It’s difficult to reveal, ”he explained.
Regarding the timing of compensation, he added: “It is difficult to determine and disclose the exact compensation period now because the situation of each company is different, but we will proceed with the compensation process as quickly as possible.”
As a result, Shinhan Bank made an autonomous compensation decision for some companies that suffered damages from Kiko for the second time after Citibank Korea the day before.
Citibank Korea also held a board meeting the day before and decided to compensate some of Kiko’s victims in terms of social responsibility.
Kiko can sell foreign currency at the contracted exchange rate if the exchange rate fluctuates within a certain range, but it is a derivative product with a structure that suffers a large loss if the exchange rate is out of range. In preparation for the exchange rate crash, many exporting SMEs came together to hedge the exchange rate, but during the 2008 financial crisis, the exchange rate skyrocketed and suffered enormous damage.
At the beginning of December last year, the FSS Dispute Mediation Committee made the decision to compensate the 15-41% loss to 4 affected companies, saying that 6 banks, including Citibank Korea, are recognized for compensation for incomplete sales. by Kiko. As for the companies, based on the results of the subcommittee’s dispute resolution, they asked the bank for self-regulation (recommended agreement).
However, of the six banks that received the recommendation at the time, five in addition to the Woori Bank (Korea Development Bank, Shinhan, Hana, Daegu and Citi Bank) said: “If you pay compensation after the expiration of the right to claim damages and damages according to civil law, he can be fired. ” He did not accept the mediation proposal. At that time, only Woori Bank accepted the subcommittee’s decision and paid 4.2 billion won in compensation to the two affected companies.
Since then, a banking council that will deal with the self-regulation of additional disputes related to the Kiko incident involving the remaining 147 companies has been in operation since last July, and the payment of compensation for some damaged companies by Citibank Korea. and Shinhan Bank is an extension of the discussions with the banking council. It was decided. The target of the compensation payment is not the FSS dispute mediation companies, but the self-regulation companies.
KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup, IBK Corporation, Citi Korea, SC Cheil, HSBC, Daegu Bank, etc., participated in this council. Famous.
A commercial bank official who has participated in the voluntary council said: “With the decision of Citi and Shinhan Bank to pay compensation, it seems that other banks may be freer from the problem of hardship.” It seems to be decided accordingly. ”
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