Hong Kong ELS banks face reduced fine of 600 billion won after FSC review

South Korea's Financial Supervisory Service (FSS) has significantly reduced the penalty for five banks accused of mis-selling Hong Kong H-share index-linked securities (ELS). The FSS initially proposed a fine of 1.4 trillion won (approximately $1 billion) to the Financial Services Commission (FSC), but this has been lowered to about 600 billion won (approximately $430 million).

The FSS convened a special disciplinary committee to finalize the penalty for KB Kookmin, Shinhan, Hana, NH Nonghyup, and SC First Bank. The ELS crisis erupted after investors suffered billions of dollars in losses when the Hong Kong H-share index plummeted, with the FSS citing insufficient explanation of potential losses by the banks.

The FSC had previously returned the FSS's initial proposal for review, requesting further clarification on the facts and legal basis. This prompted a reassessment, and the disciplinary committee reportedly lowered the severity of the banks' violations from 'medium' to 'low.' The final decision on the fine will be made by the FSC.