South Korea’s Financial Services Commission (FSC) will toughen supervisory role in the aftermath of banks’ alleged misselling of derivative-linked funds that caused massive losses and Lime Asset Management’s deferring on fund redemption due to liquidity shortage.

The authority has decided to add experts of other financial sectors to their regular inspections on banks, security firms and insurers for cross-checking, according to sources from the FSC. Under the enhanced morning system, banks that sell about 70 percent of derivative funds will go through an inspection by experts from every financial field including banking, financial investment and asset management.

The FSC is expected to announce the measure along with other plans to prevent other financial incidents and strengthen protection for investors as early as the end of this month.

The measure came after the pledge by FSC Chairman Eun Sung-soo last week during a press conference held to mark his first month on the job that he would arrange a comprehensive measure by early November at the latest to enhance investor protection.

The FSC had maintained that financial regulations should be eased to enhance autonomy in the financial market but recently shifted its stance to toughening supervision in the aftermath of the chain problems related to fund selling, according to sources.

The financial authorities have been conducting an investigation on Woori Bank and KEB Hana Bank that are under fire for irresponsible selling of high-risk derivative-linked funds that incurred billions of won in losses. The nation’s top hedge fund Lime Asset Management is also under a probe after suspending redemption on its 1.3 trillion won ($1.1 billion) worth funds due to liquidity problems.

By Jin Young-tae and Choi Mira

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