A group of civic organizations have jointly filed a complaint with the Seoul Central District Prosecutors' Office against Woori Bank over its allegedly fraudulent sales of derivatives-linked securities (DLS) products.
The groups included the Joint KIKO Countermeasure Committee, People's Solidarity for Financial Justice and Vampire Capital Hunter.
The groups said, “Since the interest rate of Germany’s 10-year government bonds started falling below zero percent in March this year, a downward trend in interest rates was already predicted to some extent. In particular, the financial products linked to the interest rate of Germany’s government bonds which were sold by Woori Bank were considered ‘very risky products.’”
They added, “However, Woori Bank deceived customers by claiming that its DLS products were ‘low risk products’ or ‘risk free assets’ and aggressively sold the products to them through its branches across the country.” Noting that investors in the products are at risk of losing all of their principal, they estimated their damage at 126.60 billion won (US$104.54 million). They also said the interest rate of the products is also highly unlikely to rise in the future.
“Currently, the interest rate of Germany’s 10-year government bonds declined to -0.689 percent and, according to financial experts, the figure has a slim chance of increasing to -0.2 percent, the baseline for principal loss, from the end of September to November this year when the products begin to mature,” said the groups.
They said it is a clear act of fraud as the bank did not inform customers of the possibility of loss from their investments. They said, “We suspect that the bank sold the products incompletely to its customers by lying them that there was little possibility of losing money, though the interest rate of Germany’s 10-year government bonds has continued to show a downward trend since the global economic crisis.”
Meanwhile, the Financial Supervisory Service (FSS) began a field investigation into commercial banks that sold DLF and DLS products on Aug. 23.