Seoul: The head of the Financial Supervisory Service (FSS) announced that discussions are underway with the financial regulator to mitigate the impact of unprecedented penalties on banks for the mis-selling of derivatives, ensuring they do not compromise financial stability.

According to Yonhap News Agency, the FSS recently informed five local banks of potential penalties amounting to approximately 2 trillion won (US$1.37 billion) due to their mis-selling of equity-linked securities (ELS) products related to Hong Kong's H Index. The final decision on the penalties will be made by the Financial Services Commission (FSC).

In a press briefing, FSS Governor Lee Chan-jin expressed concerns that these high penalties might adversely affect the banks' capital soundness by increasing their risk-weighted assets. "We are well aware of the woes that the penalties would hinder banks from actively moving into productive finance," Lee stated. He emphasized the ongoing collaboration with the FSC to balance consumer protection with minimal policy disruption.

Lee also addressed recent cybersecurity concerns, urging financial institutions to enhance consumer data protection and promising stricter regulations on security investments. This follows a data breach in September involving Lotte Card Co., which exposed personal information of approximately 3 million customers in a hacking incident. The FSS has warned of severe penalties for any significant rule violations by Lotte Card.

Additionally, Lee's comments coincided with Coupang's confirmation of a data breach affecting 33.7 million customers, nearly its entire user base. The compromised data includes personal information such as names, phone numbers, email addresses, and delivery addresses, although payment information and login credentials remain secure.