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South Korean watchdog directs 2 banks to compensate customers for losses

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South Korean watchdog directs 2 banks to compensate customers for losses

South Korea's Financial Supervisory Service directed Woori Bank and KEB Hana Bank to compensate customers up to 80% of their losses stemming from the lenders' misselling of derivative-linked funds, The Korea Herald reported Dec. 5.

The decision followed the watchdog's review of six representative cases of investor damages due to misselling, with three cases each from the two banks.

Woori Bank will have to pay the highest compensation rate of 80% to one customer, while KEB Hana bank is required to pay a maximum compensation of 65% of losses. Following the Financial Supervisory Service's announcement, both banks issued statements saying they excepted the watchdog's decision.

The financial watchdog's inspection into the misselling showed that KEB Hana and Woori Bank had sold 795 billion won of derivative-linked fund options to 3,243 investors and continued to sell such options despite the higher chances of losses for investors.

As of the end of November, the Financial Supervisory Service received 276 petitions related to derivative-linked funds, out of which 210 were confirmed as cases of actual financial damages, the publication reported.