Korean regulators hit 5 banks with record $1.38b in ELS penalties

Kookmin Bank will face the highest penalty if based on sales amount, the report said.

South Korean regulators have imposed $1.38b (KRW2t) in total regulatory penalties to five banks for different misconducts over the past two months, although reduction is likely, according to CreditSights, a Fitch Solutions service.

Kookmin Bank (KB), Shinhan Bank, Hana Bank, Nonghyup Bank (NH Bank), and SCB Korea have been fined for the alleged improper sales of equity-linked securities (ELS) tied to Hang Seng China Enterprises Index (HSCEI).

It is “encouraging” to see increased efforts by Korean authorities to curb misconduct in the financial sector, said CreditSights.

“[Whilst] the penalties are significant, their impact should remain manageable given the Big 4 banks’ comfortable capital ratios and strong earnings,” it said in a report published in February 2026.

If fines are based on each bank’s sales amount, KB will face the highest penalty, at around $692m (KRW1t) or half of the total penalties, according to CreditSights.

Shinhan, Hana, and NH will likely each face penalties between KRW260b to KRW300b (about $180m to $207.7m)

CreditSights expects a “meaningful reduction” in the final penalties, in part because the banks have already made consumer compensation payments in 2024.

“A recent court ruling favoured the bank over an individual investor, and regulators are unlikely to impose penalties that would materially weaken banks’ capital,” CreditSights wrote.

Fitch Ratings had estimated in 2024 that the ELS scandal— which involved a total of 11 Korean banks— will likely weaken their profitability and earnings. 

Compensating the losses could reduce operating profit by 6%-34% in 2024, Fitch had said.

(US$1 = KRW1,444.38; Morningstar via Google)