The chief of South Korea’s financial market watchdog said Wednesday he feels sorry for causing public concern over the massive fiasco surrounding Lime Asset Management, which the regulator‘s employee was embroiled in.
“As the head of FSS, I feel heavy responsibility for the issue and apologize for our employee’s involvement in the scandal. We will take the recent fiasco as an opportunity to enhance internal control over irregularities through measures to improve employees’ discipline as well as document security,“ said Yoon Suk-heun, governor of the Financial Supervisory Service, during a press conference held online due to the COVID-19 resurgence.
Lime Asset has been under the FSS‘ probe since July last year for having concealed huge losses and inflated investment returns to keep its customer base. It suspended fund redemption worth an estimated 1.6 trillion won ($1.4 billion). A former FSS employee allegedly met a Blue House official and handed over the authority’s internal plan to investigate into the Lime scandal.
Earlier last month, the FSS imposed disciplinary actions such as fines, partial suspension of business, dismissal of employees and closure of brick-and-mortar branches against sellers Shinhan Investment, Daishin Securities and KB Securities over the hedge fund fiasco. The financial watchdog will hold a sanctions committee in the first quarter next year concerning major sellers of the scandal-ridden hedge fund Lime Asset Management funds, including Woori Bank, Shinhan Bank, the Industrial Bank of Korea, the Korea Development Bank and Busan Bank.
“Along with the sanction procedure surrounding the troubled hedge fund sellers, the FSS has inspected 18 local asset management firms so far to identify financial frauds. We will supervise a total of 233 asset managers until 2023,” Yoon said.
Meanwhile, as economic uncertainties still loom large amid the COVID-19 resurgence, the FSS chief urged local banks to reduce their dividend payouts to a maximum of 25 percent of net income for this year, down between 5 and 7 percentage points from a year earlier. Even though major banking groups, including Shinhan Financial and KB Financial reported over 1 trillion won in the third quarter’s earnings, public concerns are still mounting over local banks‘ fiscal soundness due to a series of financial support policies, including prolonged loan repayment moratorium, officials said.
As for the overheated stock market, the FSS chief mentioned the government’s quantitative easing policy to increase money supply.
“As the government has implemented a series of expansionary fiscal policies amid growing uncertainties caused by the COVID-19 pandemic, the increased liquidity flowed into the stock market, fueling the recent buying spree,” he said. “Considering the local stock market‘s high volatility, investors should carry out a long-term investment. The FSS will closely monitor potential risks regarding the local stock market.”
By Choi Jae-hee (email@example.com