South Korea’s Fair Trade Commission has imposed a record 1.626575 trillion won in fines on 15 financial institutions for collusion in government bond auctions. The penalty exceeds the commission’s previous single-case record of 1.0311 trillion won, set in the 2016 Qualcomm case. The sanctioned group consists of 10 securities firms and five banks.
Investigators found collusion in 150 of the 345 government bond auctions held from January 2020 through June 2023. In 145 auctions, participating firms directly agreed on bid rates or volumes. Some exchanged information by telephone and messenger until one or two minutes before bidding closed.
Last-minute coordination weakened auction competition
Government bond dealers compete by offering rates and quantities in each auction. Lower winning rates reduce the government’s interest costs, but the commission concluded that coordination weakened competition, artificially raised winning rates and caused losses to the public treasury. Information exchanges from January 2022 through June 2023 were also covered after the relevant rules took effect.
The commission calculated related sales at 54 trillion won and applied a 4.5 percent penalty rate for serious violations. It then reduced each firm’s calculated fine by 30 percent, recognizing that the full value of bond auction contracts does not translate directly into gains from collusion. KB Securities received the largest fine at about 332.2 billion won, followed by NH Investment & Securities at about 242.8 billion won and Mirae Asset Securities at about 214.8 billion won.
Seven institutions with longer participation periods and involvement in more auctions were referred to investigative authorities: Mirae Asset Securities, NH Investment & Securities, Industrial Bank of Korea, KB Securities, Kiwoom Securities, Korea Development Bank and Korea Investment & Securities. The referrals are separate from the administrative fines and place the alleged conduct before investigators for further review.