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Exterior view of the Financial Services Commission. (Photo: FSC) |
[Alpha Biz= Paul Lee] South Korea’s Financial Services Commission (FSC) will continue discussions on the scale of penalties imposed on banks for the mis-selling of equity-linked securities (ELS) tied to the Hong Kong H-Index, as regulators failed to reach a conclusion during an earlier meeting.
According to financial authorities on Wednesday, the Agenda Review Subcommittee of the FSC is scheduled to review the matter on March 26. A day earlier, the Securities and Futures Commission (SFC)—an affiliate body under the FSC—held deliberations from 2 p.m. to 9 p.m. but did not finalize the amount of fines.
A financial regulator said, “The SFC did not determine the level of administrative fines,” adding that “additional discussions are necessary at the agenda subcommittee level.”
Multi-Step Sanctions Process
Sanctions against financial institutions in South Korea follow a multi-stage process, involving the Financial Supervisory Service’s (FSS) Sanctions Review Committee, the SFC, the FSC’s Agenda Review Subcommittee, and finally the FSC’s regular commission meeting.
While market expectations had been that the fine amounts would be decided at the SFC meeting, the final decision will now be made after further deliberations at the subcommittee and subsequent FSC plenary sessions, scheduled for April 4 and April 18.
Potential Fine Reductions in Focus
The banking sector is closely watching whether fines may be further reduced during the upcoming review. The FSS previously lowered the proposed penalty from around KRW 2 trillion to approximately KRW 1.4 trillion during its sanctions review.
Major commercial banks have already completed voluntary compensation totaling about KRW 1.3 trillion, covering more than 90% of affected investors, in line with FSS dispute mediation recommendations. This has raised expectations that regulators may apply additional reductions.
An industry official said banks are hoping for fines to fall below KRW 1 trillion, noting that penalties may be reduced by up to 75% under certain conditions.
Legal Basis for Leniency
Under amendments to the Financial Consumer Protection Act that took effect in November last year, regulators may reduce fines by up to 50% if post-incident remediation efforts are recognized. If additional criteria—such as prior preventive measures—are met, total reductions of up to 75% are permitted.
The final outcome will be closely scrutinized as a benchmark for how South Korean regulators balance consumer protection with incentives for voluntary compensation and corrective action by financial institutions.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
