Hong Kong ELS penalty reduced by 6,000hundred million won; bank stocks rise
The Financial Supervisory Service reduced the penalty for mis-selling Hong Kong ELS by 1trillion 4,000hundred million won, from 6,000hundred million won to. Bank stocks rose across the board, and the possibility has been raised that the provisions banks set aside in advance may exceed the actual penalty amount.
The Financial Supervisory Service reduced the penalty related to the mis-selling of Hong Kong equity-linked securities (ELS) from the existing 1trillion 4,000hundred million won to 6,000hundred million won. The reduction plan is expected to be finalized through the financial authorities’ internal procedures. The related notice is scheduled to be delivered in advance to the banking sector next week.
Bank stocks rose across the board immediately after the announcement of the penalty reduction. In some cases, provisions that certain banks had already set aside are expected to exceed the penalty amount under the reduction plan. Financial companies are reviewing the treatment of provisions and their accounting recognition.
Meanwhile, the National Assembly is discussing a bill that would impose penalties of up to 3% of revenue for personal information leaks in the financial sector. Voices have also emerged expressing concern about the response burden on domestic and foreign financial companies. The bill’s review schedule has not yet been finalized.
Financial authorities have established a system in which the Financial Supervisory Service, the Korea Banking Institute, and 8major financial holding companies cooperate to strengthen consumer protection. The agreement includes consumer protection education and enhanced supervision. Participating institutions are announcing the relevant procedures.
The banking sector plans to decide whether to整理 provisions and make additional disclosures after notification next week. Some banks said they had increased the ratio of provisions reflected. The authorities plan to provide guidance on follow-up measures in line with the finalization of the surcharge.
This incident had a direct impact on both banks and securities firms. Securities firms responsible for issuing and selling ELS are also preparing relevant disclosures. Market observers said that the relevant disclosures and the schedule for deliberation on the bill could cause fluctuations in stock prices going forward.