What Are the Consequences for 5 Banks Facing $1.37 Billion in Penalties in South Korea?
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Synopsis
Five banks in South Korea face substantial penalties totaling $1.37 billion due to improper sales of equity-linked securities. With significant financial repercussions for consumers and institutions, this situation underscores the urgent need for improved regulations in the financial sector. Discover how this scandal has prompted a reevaluation of consumer protection policies.
Key Takeaways
- Five banks in South Korea face penalties of 2 trillion won.
- The penalties are related to the mis-selling of equity-linked securities (ELS).
- Compensation to consumers has already reached 1.4 trillion won.
- New guidelines for financial institutions are on the horizon.
- The situation highlights flaws in consumer protection systems.
Seoul, Nov 28 (NationPress) On Friday, the financial regulatory authority issued notifications to five banks regarding penalties amounting to approximately 2 trillion won (equivalent to $1.37 billion) due to their mis-selling of equity-linked securities (ELS) that were linked to Hong Kong's H Index, according to informed sources.
The Financial Supervisory Service (FSS) communicated the penalties to the five banks—KB Kookmin Bank, Shinhan Bank, Hana Bank, NH Nonghyup, and SC Korea—which had already incurred significant losses by compensating customers impacted by the issue, as reported by Yonhap news agency.
The finalization of these penalties will be determined by the Financial Services Commission (FSC) at a later date, according to local industry sources.
Since 2021, banks and brokerages have sold a total of 19.3 trillion won worth of ELS products linked to Hong Kong's H index, as stated by the FSS. ELS are hybrid securities whose returns depend on the performance of underlying equities, such as stock indices.
In early 2024, buyers of HK-tied ELS faced catastrophic losses as Hong Kong's H index sharply declined. The financial regulator mandated banks to reimburse part of the losses experienced by customers due to their failure to provide comprehensive information regarding these products, including contract details and associated risks.
KB Kookmin Bank was the largest seller of HK-tied ELS products, with sales reaching 8.2 trillion won. Following it were Shinhan Bank with 2.37 trillion won, NH Nonghyup with 2.13 trillion won, and Hana Bank with 2.11 trillion won.
Last year, the banking sector collectively compensated customers with a total of 1.4 trillion won due to the fallout from this issue.
In a related matter, South Korea's financial regulatory authority is set to introduce updated guidelines for financial institutions aimed at clarifying the investment risks associated with the products they offer, as a proactive measure to enhance consumer protection following a series of recent financial mishaps, including improper sales.
The Financial Supervisory Service (FSS) outlined such plans during a debate session held in Seoul with lawmakers, experts, and civic groups focused on financial consumer protection. FSS Governor Lee Chan-jin remarked, "The improper sales of equity-linked securities (ELS) tied to the Hong Kong H index have highlighted the deficiencies in our consumer protection framework."
Point of View
I believe this news reflects a significant breakdown in consumer trust within South Korea's financial institutions. The penalties imposed on these banks highlight the necessity for stricter regulations and oversight to protect consumers from similar incidents in the future. Our commitment remains to advocate for transparency and accountability in the financial sector.
NationPress
28/11/2025
Frequently Asked Questions
What led to the penalties for the five banks?
The penalties were imposed due to the mis-selling of equity-linked securities (ELS) products tied to Hong Kong's H index, resulting in significant financial losses for consumers.
How much are the penalties amounting to?
The penalties amount to approximately 2 trillion won, which is equivalent to $1.37 billion.
Which banks are involved in this situation?
The banks involved are KB Kookmin Bank, Shinhan Bank, Hana Bank, NH Nonghyup, and SC Korea.
What actions are being taken to protect consumers?
The Financial Supervisory Service is set to introduce new guidelines to enhance consumer protection and clarify investment risks associated with financial products.
What were the financial repercussions for consumers?
Consumers suffered massive losses due to the improper sales, leading to the banks compensating them with a total of 1.4 trillion won last year.
