▲ Director of the Financial Supervisory Service Lee Bok-hyeon speaks at the plenary session of the Political Affairs Committee held at the National Assembly on the 28th. (Photo = Joint Investigation Foundation)
The legal battle between the financial authorities and the banking sector over liability for the loss of overseas interest rate-linked derivative-linked products (DLF) is expected to enter a new phase.
As pressure from the financial authorities to increase the level of response by the financial authorities has been put in place even in the political world, it is emerging as a testament to the head of the Financial Supervisory Service, Lee Bok-hyeon, head of the economic crime investigation department.
According to the Financial Supervisory Service (FSS) on the 29th, it is considering whether to appeal the lawsuit against the cancellation of heavy punishment filed by Woori Financial Group Chairman Son Tae-seung. Until the second trial, the court ruled in favor of Chairman Son. The purpose is that the FSS issued a reprimand warning to Chairman Son was unfair.
The Financial Supervisory Service is of the opinion that Woori Bank incompletely sold DLF in February 2020 and that the management, including Chairman Sohn, who was then president of Woori Bank, had poor internal control. The issue was narrowed down to whether it should be viewed as an obligation to comply with the obligation to set up internal control standards, but the court ruled that there was no legal basis for sanctioning financial institutions or executives and employees for violating this.
Immediately after the verdict of the Court of Appeal on the 22nd, the Financial Supervisory Service (FSS) said it “respects” it, but internally, it is considering an appeal to the Supreme Court. The appeal is expected to be concluded early next month, as it must be filed with the court within two weeks from the date of receiving the judgment.
In this context, political pressure is also increasing. In the plenary session of the National Assembly’s Political Affairs Committee held on the 28th, Democratic Party lawmaker Lee Yong-woo requested a thorough investigation by the FSS, saying, “It is necessary to finalize the contents of the lawsuit with Chairman Son until the third trial.” “According to the Financial Company Governance Act, it is stipulated that measures such as reprimand, warning, dismissal, etc. may be taken if internal control obligations are not fulfilled,” said lawmaker Lee.
Bok-hyeon Lee, the head of the Financial Supervisory Service, also said, “Setting up internal control standards presupposes compliance, and it is common sense for (banks) to comply.” No, that part is becoming an issue.”
Inside and outside the financial sector, the FSS is highly likely to file an appeal. President Lee has also announced several times that he will strengthen sanctions against financial institutions’ executives and employees for financial accidents. Democratic Party lawmaker So Byeong-cheol said, “There have been no sanctions on employees in the past five years regarding financial accidents,” and President Lee replied, “It doesn’t look normal.”
As the DLF lawsuit against Hana Financial Group Chairman Ham Young-joo is also ongoing, the fact that it is not easy to give up on Chairman Son alone also adds to the possibility of an appeal. There are also disciplinary measures from CEOs of financial companies for damage to private equity funds such as Lime and Optimus. That is why the FSS must somehow reverse the case of Chairman Son.
Ledger’s will to sanction financial companies is also strong. President Lee emphasized, “After taking office, we are reviewing legal principles and taking care of them first.” “I will try to win,” he said. Director Lee, who holds a certified public accountant qualification, drew attention as the first FSS director from a prosecutor. He graduated from the economics department, not the law department, and served as a prosecutor in the economic crime and criminal department of the Seoul Central District Prosecutor’s Office.