South Korea slashes fines for banks over mis-sold Hong Kong ELS

South Korea's Financial Supervisory Service (FSS) has significantly reduced the fines imposed on banks for the mis-selling of Hong Kong stock-linked securities (ELS). The initial penalty of 1.4 trillion won (approximately $1 billion USD) has been lowered to around 600 billion won (approximately $430 million USD), a reduction of more than half.

This adjustment, decided during an extraordinary disciplinary committee meeting, takes into account the banks' proactive steps in offering voluntary compensation to customers who suffered losses. The FSS's decision reflects a consideration for the banks' efforts to address the issue and mitigate damages for investors. KB Kookmin, Shinhan, Hana, NH Nonghyup, and SC First Bank are among the five institutions facing these revised penalties.

The FSS's move is interpreted as an attempt to manage the situation stably and avoid overly punitive measures against the financial institutions. Observers suggest the FSS is mindful of the potential precedent set by this case, which is the first large-scale fine imposition since the enforcement of the Financial Consumer Protection Act in 2021. The Financial Services Commission had previously pointed out the need for further review of facts and applicable laws, leading the FSS to reassess the disciplinary level.