South Korea’s Fair Trade Commission has imposed 1.6265 trillion won in fines on 15 financial companies for coordinating bids in government bond auctions. The penalty, issued to 10 securities firms and five banks, is the largest imposed by the commission in a single case. Corrective orders were also issued, while seven companies were referred to the Serious Crimes Investigation Agency.
The commission concluded that the firms participated in collusion during 150 of 345 government bond auctions held from January 2020 through June 2023. Investigators found that participants exchanged interest-rate information by telephone and messenger services until shortly before bidding closed. In 145 auctions, they allegedly agreed on specific bid rates and quantities.
Investigators traced coordination across 150 auctions
Such coordination could help participating dealers acquire bonds at lower prices, which correspond to higher yields, instead of competing independently. The commission said the conduct undermined the competitive auction process and caused losses to the state. It did not disclose how much yields increased because of the conduct or provide a specific estimate of the resulting fiscal loss.
The fine was calculated using about 54 trillion won in winning bids affected by the alleged coordination as relevant sales. Regulators then applied a uniform 30 percent reduction after considering the characteristics of the government bond market and the possibility of market disruption. The commission’s calculation therefore reflects the value of affected awards rather than a disclosed estimate of trading profit or government losses.
- Conduct period
- January 2020 through June 2023
- Auctions involving collusion
- 150 of 345 auctions
- Affected winning bids
- About 54 trillion won
- Companies referred
- Seven financial firms
The financial companies dispute that basis. They argue that primary dealers are expected to absorb designated volumes to support stable government borrowing even when doing so creates a risk of loss. According to the industry’s response reported by local media, actual trading margins are only about 0.05 to 0.1 percent of the value of winning bids, making a penalty based on the full award amount excessive in their view.
Mirae Asset Securities, Kiwoom Securities, KB Securities, NH Investment and Securities, Korea Investment and Securities, Industrial Bank of Korea and Korea Development Bank were among the seven companies selected for referral. The sanctioned firms plan to review the commission’s written decisions and may pursue administrative litigation. The penalties and potential criminal proceedings could also affect auction participation and raise questions about whether some firms can retain their primary-dealer status, although no resulting status changes have been confirmed.