Woori to outline compensation for Hong Kong-tied ELS losses

Woori Bank is expected to proactively compensate investors who have suffered financial losses from equity-linked securities (ELS) tied to the performance of the Hang Seng China Enterprises Index, marking a first in the banking industry.

According to sources, Woori Bank will outline the anticipated losses from the problematic ELS, and discuss voluntary compensation at its board meeting on Friday. If the board reaches a decision, an announcement regarding the compensation plan is expected to follow.

This initiative is the first among the banks following the Financial Supervisory Service’s (FSS) announcement of compensation guidelines last week.

Woori Bank’s sales of the HK-tied ELS are estimated at around 40 billion won (29.8 million), a sum significantly smaller than the trillions of won reported by other banks. Market observers say this smaller scale facilitates swifter discussions. Additionally, the union is pushing for a prompt resolution, citing the handling of related complaints as a reason.

The expected scale of Woori Bank’s compensation is around 10 billion won, with the average compensation level being 50 percent of the investment loss.

Despite the controversies surrounding the HK-tied ELS, Woori Bank remains the only major commercial bank to continue offering ELS products. In contrast, other major banks ceased their ELS sales at the end of January. Woori Bank stated that it stopped selling the HK-tied ELS in December 2022 and highlighted that it had already limited sales to its private banking channels.

With Woori Bank’s proactive efforts to explore voluntary compensation, other banks will face pressure to consider similar compensatory actions.

Other banks are expected to discuss compensation issues in their upcoming regular board meetings and subsequent shareholder meetings. Hana Bank held its regular board meeting on Wednesday, with Shinhan Bank and KB Kookmin Bank scheduled to follow suit Thursday.