97% of H-Index ELS Investors Agree to Voluntary Compensation

The banking sector’s voluntary compensation plan for Hong Kong Hang Seng China Enterprises Index (HSCEI) equity-linked securities (ELS) has obtained consent for 97.2% of accounts. Since April 2024, banks have voluntarily compensated investors for 20–50% of their losses, based on compensation standards drawn up by the Financial Supervisory Service (FSS).
Most of the remaining 2.8% of investors appear to be seeking additional compensation through lawsuits. However, in the financial industry, many expect further compensation to be unlikely, as courts have repeatedly found that banks’ liability is not greater than the level assumed in the FSS’s voluntary compensation plan.
The Financial Services Commission (FSC) is set to finalize the size of administrative fines related to the mis-selling of ELS at a regular meeting later this month. Within the banking sector, calls are growing to reduce the fines, with banks citing the consent rate of more than 97% as grounds for leniency.
Previously, in November last year, the financial authorities amended the Act on the Protection of Financial Consumers to allow administrative fines to be reduced by up to 75% depending on voluntary compensation and post-incident remediation. Although the total fine amount was cut from the 2 trillion won range to about 1.4 trillion won after review by the Sanctions Review Committee of the Financial Supervisory Service, banks are now hoping that, given the high consent rate, it will be further reduced to the 500–700 billion won range.
According to data titled "Consent Rate for Voluntary Compensation for Mis-selling of H-Index ELS" that the FSS submitted on the 3rd to Representative Kang Jun-hyeon of the National Policy Committee, as of the end of January, KB Kookmin Bank, NongHyup Bank (NH Bank), Shinhan Bank, Hana Bank, and Standard Chartered Bank Korea had reached voluntary compensation agreements on 164,845 accounts related to mis-sold H-Index ELS. Out of a total of 169,594 accounts, 97.2% have reached agreements. Most investors (victims) received compensation equal to 20–50% of their investment principal.
By bank, KB Kookmin Bank concluded agreements on 82,338 of its 84,710 mis-selling accounts, a rate of 97.2%, which is in line with the five-bank average. Standard Chartered Bank Korea and Hana Bank slightly exceeded the average, with agreement rates of 97.9% (8,720 accounts) and 97.8% (13,625 accounts), respectively. NH Bank and Shinhan Bank recorded agreement rates of 97.1% (30,640 accounts) and 96.5% (29,522 accounts), respectively.
Representative Kang Jun-hyeon stated, "Banks are institutions with a public character, operating on the deposits and trust of the people," and added, "They must move to restore trust through proactive voluntary compensation for consumer harm that has already occurred."
mj@fnnews.com Park Moon-soo Reporter