South Korea Imposes Record 1.63 Trillion-won Fine on 15 Bond Dealers

The Korea Fair Trade Commission (KFTC), South Korea’s competition regulator, imposed a record fine on 15 dealers over conduct in government bond auctions that finance public borrowing and help set prices across financial markets.

The penalties total 1,626,575,000,000 won, the largest fine the KFTC has imposed in a single case. The dealers comprised 10 securities firms and five banks. The conduct ran from January 2020 through June 2023.

The KFTC found coordination or exchanges of bid information in 150 auctions. In 145, it found agreements on specific bid yields or volumes. Dealers communicated by phone or messaging apps, sometimes continuing until one or two minutes before bids were due.

The commission said the conduct restricted competition and artificially raised winning yields. It decided to refer seven firms for criminal investigation: Mirae Asset Securities, NH Investment & Securities, Industrial Bank of Korea, KB Securities, Kiwoom Securities, Korea Development Bank and Korea Investment & Securities.

Government bonds fund state finances, and their yields serve as benchmarks for pricing other financial products.