It has been confirmed that the bidding scale involved by the banking sector in the treasury bond bid-rigging case amounts to approximately 14 trillion won. The banking sector is concerned that fines exceeding 2 trillion won could be imposed, based on the Korea Fair Trade Commission's stated total collusion scale of 76.2 trillion won.
According to financial industry sources on the 9th, of the 76.2 trillion won in treasury bond bid-rigging detected by the Korea Fair Trade Commission from January 2020 to June 2023, the involved bidding scale for five banks—KB Kookmin Bank, Hana Bank, NH Agricultural Cooperative Bank, IBK Industrial Bank of Korea, and Korea Development Bank—is estimated at approximately 13.9 trillion won. The involvement scale for ten securities firms is about 62.3 trillion won.
The banking sector believes the fine for this case could reach up to 2 trillion won. Viewing the violation as "extremely serious" under the Korea Fair Trade Commission's detailed criteria for imposing fines, the banking sector anticipates a maximum fine of approximately 2.085 trillion won by applying the base rate of 15%. However, the actual fine will be determined through the full meeting of the Korea Fair Trade Commission, taking into account relevant sales figures and factors for reduction or aggravation.
By bank, policy banks such as IBK Industrial Bank of Korea and Korea Development Bank have relatively large involved bidding scales, while Kookmin Bank's scale is the smallest. The actual fines are also expected to vary by bank depending on their respective involvement scales.
If the treasury bond collusion fine imposed on the banking sector reaches the anticipated level of 2.1 trillion won, the capital burden would be significant. Assuming the entire fine leads to a reduction in Common Equity Tier 1 (CET1) capital and that domestic banks maintain an average CET1 ratio of 14.5%, they would need to reduce risk-weighted assets (RWA) by approximately 14.5 trillion won or accumulate capital exceeding the fine amount.
Converting 14.5 trillion won in RWA using the banking sector's average risk weight (RW) for corporate loans of 43% yields an equivalent of approximately 33.7 trillion won in corporate loans. Assuming all RWA is utilized for lending, this implies a reduction in corporate loans of 33.7 trillion won.
The banking sector views the treasury bond issue as another major fine-related setback following the Hong Kong H-index ELS incomplete sales and LTV information exchange collusion cases. In particular, Kookmin Bank and Hana Bank are subject to fines for all three incidents.
Regarding the Hong Kong ELS case, the Financial Supervisory Service reduced the fines for five banks—Kookmin, Shinhan, Hana, NH Agricultural Cooperative Bank, and Standard Chartered Bank Korea—to approximately 600 billion won in June and submitted this to the Financial Services Commission. This represents a significant reduction from the initially notified level of around 2 trillion won. The market estimates Kookmin Bank's ELS fine at approximately 307 billion won and Hana Bank's at about 79 billion won.
The fine for the LTV information exchange collusion was already decided by the Korea Fair Trade Commission last January, but it has since escalated into litigation due to opposition from banks. The total fines for the four major banks (Kookmin, Shinhan, Hana, and Woori) amount to 272.014 billion won. Hana Bank faces the highest fine at 86.9 billion won, followed by Kookmin Bank at 69.7 billion won.
Kookmin Bank is expected to bear a total fine burden of approximately 377 billion won when combining the ELS fine of about 307 billion won with the LTV fine of 69.7 billion won. Hana Bank is projected to face a combined fine of approximately 166 billion won, adding its ELS fine of about 79 billion won to the LTV fine of 86.9 billion won.
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