Watchdog sharply cuts penalties on 5 banks over mis-selling of HK-tied derivatives

▲ The file photo, taken Feb. 15, 2024, shows members of civic activist groups staging a protest in Seoul, calling for a government audit into the alleged incomplete sales of equity-linked securities tracking Hong Kong's H Index. (Yonhap)

banks-HK-tied ELS losses

Watchdog sharply cuts penalties on 5 banks over mis-selling of HK-tied derivatives

SEOUL, June 4 (Yonhap) -- Five banks were slapped with some 600 billion won (US$393 million) in penalties by the financial watchdog Thursday over their mis-selling of equity-linked securities (ELS) products tracking Hong Kong's H Index.

The amount is a sharp cut from the initial 1.2 trillion-won fine on the five lenders -- KB Kookmin Bank, Shinhan Bank, Hana Bank, NH Nonghyup and SC Korea -- which had already suffered massive losses as they had compensated customers over the mishap, according to the Financial Supervisory Service (FSS).

Last month, the Financial Services Commission (FSC), Seoul's financial regulator, tossed the watchdog's proposed penalties back, saying that some legal issues should be further reviewed.

The penalties will be finalized by the FSC later.

Banks and brokerages have sold a combined 19.3 trillion won worth of ELS products, tracking Hong Kong's H index since 2021, the FSS said.

KB Kookmin Bank sold the largest amount of HK-tied ELS products worth 8.2 trillion won, followed by Shinhan Bank with 2.37 trillion won, NH Nonghyup with 2.13 trillion won and Hana Bank with 2.11 trillion won.

ELS refers to hybrid securities whose returns are linked to the performance of underlying equities, including a stock index.

In early 2024, HK-tied ELS buyers suffered massive losses as Hong Kong's H index plunged.

The financial regulator ordered banks to compensate part of the losses incurred by customers as they failed to provide all necessary information to consumers about products, including contract terms and associated risks.

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