FSS Eases Hong Kong ELS Fines on Banks to 1.4 Trillion Won...Sanctions Downgraded to "Institutional Warning" (Comprehensive)

Sanctions Confirmed for Five Banks Including KB Kookmin, Shinhan, and Hana
Fines Cut from 1.9 Trillion Won to 1.4 Trillion Won...Business Suspension Downgraded to Institutional Warning

The Financial Supervisory Service has reduced the level of fines on the banking sector in connection with the controversy over the misselling of equity-linked securities (ELS) tied to Hong Kong’s H-Share Index (Hang Seng China Enterprises Index, HSCEI), cutting the amount from the initially planned approximately 1.9 trillion won to around 1.4 trillion won. Institutional sanctions have also been eased by one level, from suspension of business to an “institutional warning.”

Lee Chanjin, Governor of the Financial Supervisory Service, is attending a meeting with bank presidents at the Bankers' Hall in Jung-gu, Seoul, and is delivering opening remarks. 2026.02.12 Photo by Yoon Dongju

According to the financial authorities on the 12th, the Financial Supervisory Service held a sanctions review committee on Hong Kong ELS on this day, targeting KB Kookmin Bank, Shinhan Bank, Hana Bank, NH Nonghyup Bank, SC First Bank Korea, and others, and resolved these sanctions.

An official at the Financial Supervisory Service said, “Institutional sanctions have been adjusted to an institutional warning, and fines have been adjusted to the 1 trillion won range,” adding, “We also revised and resolved the sanctions on executives and employees by mitigating them by one to two levels.” The official further explained, “We adjusted the scope and level of sanctions in consideration of the banks’ active follow-up remediation efforts and their measures to prevent recurrence.”

Previously, at the prior notification stage, the Financial Supervisory Service had announced that it would impose suspension of business on five banks and levy a total of 1.9 trillion won in fines. However, at the final sanctions review, this was eased to institutional warnings, and the fines were reduced to around 1.4 trillion won.

A financial industry official said, “The members of the sanctions review committee largely accepted the Financial Supervisory Service’s claim that there had been improper solicitation by the banks,” and added, “However, in the process of calculating the fine ratio, they are understood to have partially accepted the banks’ arguments.”

This reduction in fines had been somewhat anticipated. On the 9th, Governor Lee Chanjin of the Financial Supervisory Service, when announcing this year’s work plan, stated in relation to the Hong Kong ELS sanctions review, “We will reflect the banks’ follow-up remediation and voluntary compensation efforts.” The financial industry interpreted this as signaling that the size of the fines could be lower than the level initially notified.

In fact, in accordance with the Financial Supervisory Service’s dispute settlement proposal, the banks have already completed voluntary compensation totaling 1.3 trillion won for more than 90% of all victims.

It is reported that, at the sanctions review on this day, some banks argued for a reduction in the level of sanctions and referred to a court ruling. Recently, the Seoul District Court handed down a ruling in a damages lawsuit filed by an investor in Hong Kong H-Share Index ELS against a bank, holding in effect that it was difficult to see that the bank had violated its duty to explain. However, the Financial Supervisory Service’s position is that this case is subject to different standards from those applied in the current sanctions review, because the investor in question was a professional investor and the ruling concerned a matter that arose before the enforcement of the Financial Consumer Protection Act.

Meanwhile, the outcome of this sanctions review has not yet been finally confirmed. The sanctions review committee is an advisory body to the Governor of the Financial Supervisory Service and has no legal effect, and the final level of sanctions will be confirmed after resolutions at the Securities and Futures Commission of the Financial Services Commission and at a regular meeting.