All Headlines 17:13 March 05, 2020
SEOUL, March 5 (Yonhap) -- Two of six banks in a decade-old dispute with local companies over currency-linked derivatives products said Thursday that they have rejected the latest mediation proposed by South Korea's top financial regulator.
The move by two lenders -- Citibank Korea and Korea Development Bank (KDB) -- came about three months after the dispute settlement committee of the Financial Supervisory Service (FSS) advised the banks to pay a combined total of 25.5 billion won (US$21.5 million) to four local businesses that had signed to purchase the so-called knock-in, knock-out contracts in 2008 or prior.
"After extensive internal discussions and consultations with the board of directors regarding the FSS mediation recommendation made by the Financial Disputes Mediation Committee (the 'Committee') with respect to Ilsung Hisco, Citibank Korea does not propose to proceed as recommended by the Committee," Citibank said in a released statement.
Under the FSS recommendation proposed on Dec. 13, Citibank Korea was advised to pay 600 million won to the local firm, according to earlier reports.
KDB has also decided to reject the FSS proposed settlement, according to bank officials.
The state-run bank was told to pay 2.8 billion won in compensation to Ilsung Hisco.
The FSS had also recommended the banks to voluntarily settle their disputes with some 150 other local firms that had failed to file legal complaints.
Citibank said it will closely review each case to work toward a solution.
"With respect to other entities which have not obtained court judgments and are being reviewed by the FSS for consideration, Citibank Korea will review all relevant facts on a case by case basis in accordance with past judicial precedent and work towards a solution which may, depending on the facts of each situation and the application of judicial precedent, include partial settlement," it said.
The KIKO currency-linked derivatives were designed to allow buyers to hedge against volatile currency swings, allowing them to sell foreign currency at a fixed rate when the exchange rate moved within a pre-set range.
However, with the outbreak of the global financial crisis in 2008, the Korean won tumbled 25.7 percent against the U.S. dollar in that year alone, causing heavy losses for KIKO buyers.
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