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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] SEOUL, Sept. 3 — South Korea’s major banks are bracing for unprecedented regulatory penalties that could reshape their lending capacity for the next decade. Caught in a series of investigations over alleged mis-selling of equity-linked securities (ELS) tied to the Hong Kong H-Index, collusion on loan-to-value (LTV) ratios, and price-fixing among primary dealers (PD) of government bonds, the nation’s top five lenders may be facing fines of up to 9.5 trillion won (approx. USD 7 billion).
Industry sources say KB Kookmin, Shinhan, Hana, Woori, and NongHyup banks could be collectively hit with penalties before year-end, depending on rulings from financial regulators and the Fair Trade Commission. The ELS scandal alone could result in fines as high as 7.4 trillion won, with all five banks implicated. LTV collusion involving four banks—KB Kookmin, Shinhan, Hana, and Woori—may add up to 2 trillion won, while separate PD collusion cases could bring hundreds of billions more in fines for KB Kookmin, Hana, and NongHyup.
What alarms the banking sector most is not only the sheer scale of the potential fines, but their impact on capital adequacy. Because fines are treated as risk-weighted assets (RWA), the projected 9.5 trillion won in penalties could expand banks’ RWA by 66.5 trillion won. Without additional capital injections, analysts estimate this could force banks to scale back corporate lending by as much as 88.7 trillion won over the next 10 years—equivalent to 16% of the current SME loan balance at the nation’s four listed banking groups.
The looming penalties underscore heightened regulatory scrutiny on systemic risks and misconduct in the financial sector, and signal long-term challenges for banks seeking to balance compliance, capital stability, and continued support for corporate borrowers.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
