The Korean Financial Industry Union publicly raised concerns, saying financial authorities’ sanctions approach and the Financial Supervisory Service’s inspection practices related to the Hong Kong H-Index ELS case are causing structural harm to frontline financial workers, ahead of a second sanctions review meeting on Thursday.

The union held a news conference on Wednesday afternoon in front of the Financial Supervisory Service in Yeouido. It called for a full review of standards for calculating fines related to the ELS case and for immediate correction of allegations of human-rights violations raised during the special inspection process. The union said the current standards for imposing ELS fines are based on an excessive interpretation that departs from the law’s purpose and the principle of proportionality.

In opening remarks, union chairman-elect Yun Seok-gu (윤석구) criticised the watchdog, saying, "The Financial Supervisory Service should be the final guardian of the financial industry, but on the ground today it is not supervision, it is fear that is at work." He added that if fine-calculation standards are applied in an overly expanded way, it could lead to contraction across the financial industry, job insecurity and reduced consumer choice. "We are not asking for a free pass. We are asking for recalculation in line with principles," he said.

The union expressed concern that the ELS case is the first application since supervisory rules were revised. It said if an incorrect standard is confirmed, it could become a negative precedent for future financial incidents. It said that because the Financial Services Commission has said the sanctions plan is not yet final, this is the last chance to review the fine standards from scratch.

Speakers on the ground also warned that the burden of fines could deal a direct blow to the survival of financial firms and jobs. Moon Seong-chan (문성찬), head of SC First Bank’s union branch, said, "I stood here with an urgent sense of crisis that the right to survival of some 4,000 SC First Bank workers could be shaken to the core." He said excessive fines carry a high risk of spurring the parent, Standard Chartered Group, to make the extreme choice of withdrawing from retail banking in South Korea.

He added that punitive fines that do not meet international standards would push some 4,000 workers to the edge and lead to a national loss by harming diversity in the domestic financial ecosystem. He said SC First Bank operates retail and corporate banking separately, and ELS falls under the retail banking division.

Moon said retail banking earned about 52.0 billion won in profit through September last year. He said the bank completed voluntary compensation for 97 percent of Hong Kong H-Index ELS accounts in line with financial authorities’ policy, and the amount reached 99.7 billion won, six times the ELS sales profit of about 16.2 billion won. He said if fines in the 100.0 billion won range reported by the media are also confirmed, retail banking would suffer an irreparable blow.

He also said the core principle of the constitution and administrative law is proportionality, meaning one should not fire a cannon to catch a sparrow. He said the fine calculation goes far beyond the goal of protecting financial consumers and carries a high risk of undermining the openness and trust of the financial market.

High-pressure special inspection controversy spreads

Criticism of the watchdog’s special inspection methods was also raised. The union said special inspections targeting the financial sector more broadly have become high-intensity and prolonged, placing an excessive burden on the field.

After President Lee Jae-myung criticised financial holding companies as a "corrupt inner circle", an intensive inspection of BNK Financial has been repeatedly extended and is becoming prolonged. The watchdog conducted an ad hoc inspection of BNK Financial in December last year and has since extended it four times, continuing an intensive probe from Jan. 2 this year to the present.

The union said that in the process, high-pressure questioning, repeated summons, shouting and psychological pressure have become routine, leaving frontline workers suffering severe stress and anxiety. It said such conduct in special inspections raises concerns over procedural violations as well as the possibility of human-rights violations.

The union said investigators have conducted questioning by repeatedly shouting at those being inspected, and branch employees have been summoned 4 to 5 times a week, making it difficult to perform normal duties. It also said there have been continued cases in which psychological pressure is applied by bringing up senior managers, such as executive vice presidents or bank presidents, when desired answers are not provided.

Yun said supervision is legitimate only when grounded in procedure, proportionality and human dignity, adding that the current approach is closer to an abuse of power than supervision.

In its statement, the union formally demanded a full review of the base numbers, scope and levy rates that underpin ELS fine calculation, and recalculation to a reasonable standard. It also demanded an immediate review of allegations of human-rights violations raised during special inspections and a halt to high-pressure inspections that exceed legal limits. After the news conference, it delivered a letter containing these demands to the watchdog.

The union said financial supervision should operate on trust, not fear, and said the watchdog must take problems raised on the ground seriously and immediately correct the wrong direction.