The Financial Supervisory Service (FSS) has decided to sharply reduce the fines for the banking sector's mis-selling of Hong Kong H-index equity-linked securities (ELS) from the previous 1.4 trillion won to the 600 billion won range.
According to the financial industry on Wednesday, the FSS held its 12th Sanctions Review Committee meeting that day and decided to impose a combined fine in the 600 billion won range on KB Kookmin, Shinhan, Hana, NH NongHyup, and SC First Bank.
This is a significant reduction from the fine originally under consideration. While forecasts within and outside the financial industry had pointed to fines totaling 4 trillion to 5 trillion won, the FSS gave advance notice of fines of around 2 trillion won last November. After additional sanctions reviews, it finalized the fine at around 1.4 trillion won in February this year and conveyed it to the Financial Services Commission (FSC). However, last month the FSC returned the sanctions agenda, requesting supplementation of some facts and the applicable laws and legal reasoning, prompting further discussions.
The sharp reduction in the fine is interpreted as resulting from the FSS judging the severity of the violations — a key criterion in calculating fines — to be lower than before. In this sanctions review, the FSS is known to have downgraded both the banks' motive and method of violation from "medium" to "low," lowering the base assessment rate itself. It was reported that the banks' substantial progress in providing voluntary investor compensation was also reflected as a mitigating factor in the earlier sanctions review. Since the Hong Kong ELS loss incident, the banks have carried out compensation procedures exceeding 1 trillion won.
The final level of sanctions will be confirmed through a resolution at an FSC regular meeting. The FSS plans to soon convey to the FSC its review results in response to the commission's request for supplementation, along with opinions from the sanctions review discussions. While some observers say a conclusion could come as early as the FSC's regular meeting on the 17th of this month, the process may continue until early next month depending on the agenda review schedule. "This reduction has, to some extent, eased the banking sector's concerns," a financial industry official said. ▷See this newspaper's November 14, 2025 edition, Pages 1 and 3.
