Antitrust fines to hit brokerage, bank earnings but leave capital buffers intact: KIS report
Summary
The Fair Trade Commission imposed roughly 1.6 trillion won in fines on 15 financial institutions in South Korea for collusion in government bond auctions from January 2020 through June 2023. Korea Investors Service said the penalties will reduce 2026 earnings, particularly at heavily fined brokerages, but are unlikely to undermine capital buffers. The firms may challenge the decision, though filing a lawsuit does not automatically delay payment.
Key Facts
- The FTC applied a 4.5 percent rate to about 54 trillion won in sales it judged were affected by the collusion, then adjusted penalties for individual factors.
- The fines ranged from 3.9 billion won to 332.2 billion won; KB Securities received the largest penalty, while the 10 brokerages bore most of the total.
- Seven institutions were referred to prosecutors for criminal investigation because of longer involvement and more collusive bids.
- KIS said the fines equal between 0.0 percent and 4.2 percent of each firm’s equity, and most firms are expected to record provisions in the third or fourth quarter.
- IBK’s fine equals 0.4 percent of its equity and 5.7 percent of its 2025 net profit; the other sanctioned banks face fines below 0.1 percent of equity or 3.6 percent of last year’s net profit.
Record penalties expected to squeeze second-half profits
Editor’s note
This article is part of a series utilizing data and reports provided by Korea Investors Service (KIS) to offer our readers in-depth insights on industry trends, corporate fiscal health and M&A deals.
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Korea’s largest-ever antitrust fine will cut into this year’s earnings at the brokerages and banks that underwrite government debt, but it is unlikely to weaken their capital buffers, according to Korea Investors Service (KIS), a Moody’s affiliate.
In a report released earlier this week, the credit rating agency said the penalties imposed by the Korea Fair Trade Commission (FTC) will make “a short-term decline in profitability unavoidable,” especially at the firms facing the largest penalties. It added that their capital strength and the earnings they built up in the first half should be enough to absorb the cost, creating a formidable yet manageable financial hurdle for the country's primary financial institutions.
The regulatory crackdown stems from an investigation into primary dealers in Korea's sovereign debt market. The FTC issued corrective orders on Wednesday and imposed roughly 1.6 trillion won ($1.2 billion) in combined fines on 15 financial institutions — all designated primary dealers responsible for underwriting Korea Treasury bonds — for restricting competition over a span of roughly three and a half years, from January 2020 through June 2023.
The FTC said the 15 firms agreed on bid rates and volumes or exchanged sensitive bid-rate information before taking part in competitive auctions for Korea Treasury bonds. It classified the conduct as two types of collusion under the Monopoly Regulation and Fair Trade Act: information-exchange collusion and bid rigging.
According to KIS, the regulator calculated the fines by applying a 4.5 percent rate to about 54 trillion won in sales it judged were affected by the collusion, then adjusted each firm’s amount for individual factors. In addition to the financial penalties, the regulator decided to refer seven institutions with longer periods of involvement and higher numbers of collusive bids to prosecutors for criminal investigation.
Individual penalties vary widely across the 15 institutions, ranging from 3.9 billion won to 332.2 billion won, with the securities industry bearing the brunt of the bill. Ten brokerages were hit with the lion's share of the total, led by KB Securities with the largest single penalty at 332.2 billion won. It was followed by NH Investment & Securities at 242.8 billion won, Mirae Asset Securities at 214.8 billion won, Shinhan Securities at 147.3 billion won, Daishin Securities at 120.1 billion won, Samsung Securities at 118.9 billion won, Kiwoom Securities at 83.8 billion won, Meritz Securities at 64.6 billion won, Korea Investment & Securities at 37.9 billion won and Kyobo Securities at 13.7 billion won.
Among the five sanctioned banks, the Industrial Bank of Korea (IBK) received the largest penalty at 135.8 billion won, followed by the Korea Development Bank (KDB) at 62.3 billion won, Hana Bank at 25.5 billion won, NongHyup Bank at 23 billion won and KB Kookmin Bank at 3.9 billion
Sector snapshot: Key players
Industry risk: limited.
For credit analysts, the key variables now are how much of each fine is booked and when, whether appeals succeed in reducing the amounts, when cash actually leaves the firms and how capital ratios change in the second half. KIS also flagged reputational and internal-control risks that could indirectly weaken the firms’ business bases and credibility.
Key player profiles:
KB Securities faces the heaviest burden. Its 332.2 billion won fine equals 4.2 percent of its equity and 54.2 percent of its 2025 net profit, and it was referred to prosecutors. It booked the entire amount as a provision in its preliminary third-quarter results.
NH Investment & Securities’ 242.8 billion won fine is 2.5 percent of its equity and 26.7 percent of last year’s net profit. It was referred to prosecutors.
Mirae Asset Securities’ 214.8 billion won fine is 2.0 percent of its equity and 36.1 percent of its 2025 profit. It was also referred to prosecutors.
Shinhan Securities’ fine of 147.3 billion won is 2.5 percent of its equity, but it equals 41 percent of its 2025 net profit, the third-highest share among the 15 firms.
Daishin Securities’ 120.1 billion won fine is 2.6 percent of its equity, the second-highest ratio after KB Securities, and 25.3 percent of its 2025 profit.
Industrial Bank of Korea received the largest fine among the banks at 135.8 billion won. That is only 0.4 percent of its equity and 5.7 percent of its 2025 profit. It was referred to prosecutors, as was Korea Development Bank.
Earnings hit concentrated in second half
The timing of the penalties poses an immediate hurdle for corporate balance sheets. KIS noted that while the exact timing of when each institution records the expense depends on its internal accounting judgments, most firms are expected to recognize the provisions in the third or fourth quarter now that the FTC’s ruling has specified exact amounts. KB Securities has already booked its 332.2 billion won fine in full as a provision in its third-quarter preliminary earnings disclosure.
“As a result, 2026 profitability could fall considerably, centered on the financial institutions facing large fines,” the rating agency said.
The timing compounds existing operational headwinds. KIS pointed out that the broader operating environment for securities houses is turning less favorable in the second half of the year, meaning that massive provisions will place acute downward pressure on annual net income.
Capital soundness seen as manageable
Despite the severity of the earnings squeeze, KIS drew a clear line between profitability and capital soundness. Because the fines represent between 0.0 percent and 4.2 percent of each firm’s equity, the agency concluded that the direct impact on capital adequacy should generally be limited.
Major brokerages serving as primary dealers maintain relatively strong capital bases and solid business foundations. Furthermore, strong operating performance through the first half of 2026 left these firms with a healthy cushion of earnings, enabling them to absorb the regulatory charges without destabilizing their capital adequacy.
The banking sector faces even lighter exposure relative to its size. With the exception of IBK, whose penalty equals 0.4 percent of its equity and 5.7 percent of its 2025 net profit, none of the sanctioned banks face fines exceeding 0.1 percent of equity or 3.6 percent of last year’s net profit.
Jargon buster
Primary dealer: A financial institution licensed by the government to underwrite and trade Treasury bonds, with an obligation to take part in auctions and make markets in government debt. There are 20 now, and there were 18 during the period covered by the case. They are required to bid in Treasury auctions and make markets in government debt, which makes them central to how the state funds itself.
Bid rigging: An agreement among bidders on the prices, here interest rates, or quantities they will submit in an auction, which limits competition.
Information-exchange collusion: Sharing competitively sensitive information, such as planned bid rates, with rivals in a way that restricts competition even without an explicit price agreement.
Affected sales: The revenue a regulator judges was influenced by illegal conduct, used as the base for calculating fines.
Provision: An amount a company books as an expense for a likely future payment whose size can be reliably estimated, which reduces profit when it is recorded.
Capital adequacy: How much capital a financial firm holds relative to its risks, which measures its ability to absorb losses.
Stay of execution: A court order suspending enforcement of an administrative measure, such as a fine payment, while a lawsuit is pending.
Legal battles loom over payment timing
The sanctioned financial institutions are expected to review the FTC’s written decision and potentially file formal objections or administrative lawsuits to overturn the fines. KIS anticipates that defense strategies will scrutinize individual participation across specific auctions, the duration of violations, the calculation of affected sales and the appropriateness of the fine-computation methodology — particularly by distinguishing between auctions involving concrete agreements on rates and volumes versus those involving only information exchanges.
Filing a lawsuit, however, does not automatically suspend the legal obligation to pay. KIS noted that firms may apply for a stay of execution, extended payment deadlines or installment plans alongside their appeals. If a stay is not granted, firms could be forced to pay the fines while litigation is still pending, triggering immediate cash outflows. While a stay or installment arrangement would delay or spread out liquidity burdens, firms will still take an immediate profit-and-loss hit once accounting criteria for recognizing provisions are met.
Moving forward, KIS said it will closely monitor the actual scale and timing of provisions booked by each firm, the progress of legal appeals and any adjustments to final penalties, funding burdens from fine payments and second-half earnings and capital ratios.
Summary
The FTC fined 15 primary dealers a record 1.63 trillion won for rigging Treasury bond auctions between 2020 and 2023. KIS expects the fines to sharply reduce 2026 profits at the hardest-hit firms, led by KB Securities, NH Investment & Securities and Mirae Asset Securities. Because the penalties equal no more than 4.2 percent of any firm’s equity, the agency sees limited direct damage to capital adequacy. Appeals are likely, but cash outflows may come first unless courts suspend payment.
This article was published with the assistance of generative AI and edited by The Korea Times.
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