[2021 National Audit] Yoon Kwan-seok "Banks Received 84.3 Billion KRW in ETF Fees Over 3 Years"

[Asia Economy Reporter Kiho Sung] It has been revealed that over the past three years, specific money trusts incorporating ETFs from the five major commercial banks sold a total of 11.0089 trillion KRW, generating commissions amounting to 84.3 billion KRW.

According to data received on the 21st from the Financial Supervisory Service by Yoon Kwan-seok, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, over three years, Kookmin Bank sold ETF-incorporated trusts worth 5.8524 trillion KRW and earned 55.8 billion KRW in commissions; Shinhan Bank sold 2.0337 trillion KRW and earned 9.9 billion KRW; Hana Bank sold 313.6 billion KRW and earned 2.9 billion KRW; Woori Bank sold 1.6632 trillion KRW and earned 11.6 billion KRW; and NongHyup Bank sold 1.6632 trillion KRW and earned 4.1 billion KRW in commissions.

The banks perform the task of selling the target-conversion type ETF-incorporated trusts without separate management after product setup, selling once the target return rate is reached, while charging an upfront commission of about 1%. Considering that 89.8% of the target return rate set ETF trusts sold last year had a target below 5%, more than 20% of customer profits were taken as commissions.

Representative Yoon pointed out that while securities firms have been charging almost no online stock trading commissions recently, banks have imposed excessive commission burdens on customers despite the economic effect being the same.

When returns are good, as in last year, the target profit can be achieved and contracts terminated within a few weeks, allowing continuous upfront commission collection by repeatedly subscribing to the same product. It is known that some banks collected commissions more than ten times from a single customer through ETF trusts last year.

Meanwhile, until 2019, the number of non-face-to-face trust contracts (based on ELS-incorporated specific money trusts) by the five major commercial banks was zero, but last year it increased to 5,174 contracts worth 226.3 billion KRW. For ETF-incorporated trusts, it rose to 7,712 contracts worth 67.8 billion KRW. Since more banks have started sales this year, the sales amount is expected to have increased further. Some banks have been selling non-face-to-face trusts related to ELT and ETF since last year, based on the judgment that mobile app login actions specify customers rather than an unspecified majority.

The problem is that the current Capital Markets Act prohibits trust advertisements to an unspecified majority, but there is no clear standard on whether trust sales through mobile apps constitute advertising, resulting in no sales in other financial sectors.

Representative Yoon Kwan-seok stated, “Since it appears that commissions are being excessively collected without operating the incorporated ETFs, improvements such as commission regulation are necessary.” He added, “Regarding non-face-to-face trusts, there is confusion in legal interpretation across financial sectors, so financial authorities need to promptly clarify their stance from the perspective of fair competition and financial consumer protection.”