Financial Services Commission raises need to unify bank-sector standard forms; no common guidelines exist despite expansion of discretionary trusts and similar products; banks say standards already tightened, but critics call any form-based fix cosmetic
![Customers conduct business at a bank branch in Yeouido, Seoul. [Herald DB]](https://wimg.heraldcorp.com/news/cms/2026/06/03/news-p.v1.20251015.58da92468ed241e388a3caa319a7196b_P1.jpg)
South Korea's financial authorities are internally reviewing a plan to introduce standardized sales forms for complex, high-risk financial investment products sold through banks — including those distributed via discretionary trusts — to reduce mis-selling and strengthen consumer protection.
The Financial Services Commission has been conducting working-level research into the need to standardize bank-sector forms for high-risk financial investment products, after the issue was raised during a recent revision of supervisory regulations on financial consumer protection, according to financial authorities.
Banks currently follow standard forms drawn up by the Korea Financial Investment Association in the absence of any unified self-regulatory or industry-wide criteria for selling such products. Even then, some banks apply only the general standard investment solicitation guidelines used for ordinary financial investment products, simply attaching a handful of additional documents — such as a subscription withdrawal request form — when selling high-risk products.
Calls have long been made for more thorough risk disclosure on financial investment products such as equity-linked securities (ELS), derivative-linked securities (DLS), and derivative-linked bonds (ELB and DLB), given their highly complex structures and significant potential for principal loss.
Banks face heightened scrutiny in particular because they serve as a major point of contact for retail customers and are widely perceived as conservative, safe institutions — making stronger disclosure obligations all the more necessary, advocates argue. That concern has grown in the wake of the mis-selling scandal involving ELS tied to the Hong Kong H-Index (Hang Seng China Enterprises Index), which resulted in losses of approximately 4.6 trillion won (about $3.04 billion).
In response, the FSC revised its supervisory regulations to expand the range of products required to clearly disclose potential disadvantages at the top of their product descriptions. The key change extends that requirement beyond high-risk financial investment products to cover high-risk discretionary trust contracts and high-risk investment advisory contracts as well.
At the FSC's sixth regular meeting on April 1, one commissioner said the revision was intended to address the fact that "while the Korea Financial Investment Association's standard forms are relatively well developed and continue to improve for securities firms selling high-risk financial investment products, the bank side needs further supplementation." The commissioner added that "when banks sell such products through trusts as a side business, they too need to standardize their forms."
The commissioner went on to say that authorities should "consult with relevant associations on ways to raise overall standards across the board." The argument is that just as the securities industry has refined its forms through the KFIA, banks must also operate under elevated, uniform guidelines to ensure no blind spots remain in investor protection.
An FSC official said there had been "a concrete proposal to unify standard forms, and we are currently researching and reviewing it internally." If the need is confirmed within the FSC, the commission is expected to work with the Korea Federation of Banks to establish common standard forms for high-risk financial investment products across the industry.
Bank-specific standard forms, if introduced, are expected to help customers quickly grasp the risks of complex financial products and make more informed investment decisions.
A banking industry official acknowledged that "guidelines for high-risk product investment are admittedly somewhat ambiguous," adding that "standardized forms would provide a clearer benchmark from a consumer protection standpoint."
Some critics, however, dismiss the standardization effort as a cosmetic measure. They argue the real issue lies not in paperwork but in embedding consumer-protection-centered sales practices and internal controls at the branch level. That view is reinforced by the fact that banks have already applied stricter sales standards than securities firms, drawing on the financial authorities' comprehensive plan to prevent mis-selling of high-risk financial investment products.
Major banks, for instance, strictly limit the range of products a customer may invest in based on risk-tolerance assessments. Unlike securities firms — where a customer classified as risk grade 2 can invest in high-risk (grade 1) products by submitting a separate confirmation form — banks do not permit such exceptions. For customers aged 65 and older, banks have expanded mandatory documentation requirements and made full audio recording of the entire sales process compulsory.
A commercial bank official said that "the disclosure obligations and other responsibilities as a seller do not differ significantly even when following KFIA standards," adding, "What matters is how faithfully and rigorously those standards are applied."
Meanwhile, the FSC recently returned to the Financial Supervisory Service a proposed sanctions package against banks and securities firms over the Hong Kong ELS mis-selling case, citing the need to supplement certain facts and legal grounds. The FSS is expected to convene a special sanctions review committee on June 4 to revisit the penalty proposals.
Attention is focused on how much the originally proposed fines of 1.4 trillion won against five banks — KB Kookmin, Shinhan, Hana, NH NongHyup and SC First — will be reduced. Market watchers have suggested the penalties could be cut to as low as 500 billion to 700 billion won.
An FSS official said the agency had "reached some internal conclusions on the FSC's requests," adding that "once the sanctions committee votes, we expect to submit the revised proposal to the FSC immediately."
The embedded link references a related article on the FSC and FSS in effect returning the Hong Kong ELS sanctions package, published Dec. 6, 2025.
ehkim@heraldcorp.com
