South Korea hits banks and brokerages with record 1.63 trillion won bond-collusion fine

What the commission found

After a yearlong investigation, the regulator said finance ministry designated primary dealers either swapped bid-yield information or coordinated both pricing and quantities across 150 Korean Treasury Bond auctions conducted between January 2020 and June 2023. It determined that in 145 of those, the firms agreed on exact bid yields or volumes. "The conduct effectively undermined the competitive auction system and caused losses to the government," the commission said Wednesday.

Primary dealers are banks and securities firms selected to bid directly in government bond sales. The regulator added that the steps are expected to foster more competition in a market with high entry barriers and to enhance the efficiency with which public finances are managed.

Who was hit and how much

KB Securities drew the largest assessment at 332.2 billion won, about one fifth of the total. NH Investment & Securities and Mirae Asset Securities were next among the penalized firms.

The 1.63 trillion won total is the biggest cartel case fine the commission has imposed, exceeding the 747.6 billion won penalty on starch makers earlier this year.

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The market backdrop

South Korea's central government bond market is about 1,261 trillion won ($942 billion). It is dominated by domestic banks that underwrite, trade, and hold government debt, and they receive benefits such as noncompetitive purchase rights and funding support in return.

The regulator also filed criminal complaints with the Serious Crime Investigation Agency against seven firms: Mirae Asset Securities, NH Investment & Securities, Industrial Bank of Korea, KB Securities, Kiwoom Securities, Korea Development Bank, and Korea Investment & Securities.

Why it matters for your portfolio

If the expected boost to competition shows up in primary auctions, issuance and management of government debt could shift, with knock on effects for pricing and liquidity across Korea's rates market. The record size of the penalty also signals tougher enforcement around auction practices, which investors will watch as they assess execution risk and trading conditions.

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