Korea Financial Investment Association: “Excessive sanctions against PD companies for treasury bonds, concerns over serious side effects… a blow to external credibility”

“Concerns about impact on securities firms’ liquidity, active support for administrative litigation, etc.”

Chairman Hwang Seong-yeop "Deeply concerned... efforts to strengthen internal control"

(Seoul = Yonhap News) Reporter Kang Su-ji = While the Fair Trade Commission decided to impose the largest fine ever on the financial investment industry for collusion in government bond bidding, the Korea Financial Investment Association expressed regret on the 11th, saying that the Fair Trade Commission's sanctions were excessive.

The association said it was concerned about serious side effects from sanctions and said it would actively support the industry in responding through legal procedures, such as administrative litigation.

On this day, the Fair Trade Commission imposed a fine of more than KRW 1.6 trillion, believing that in the treasury bond bidding market issued by the Ministry of Finance and Economy, treasury bond dealers (PDs), including 10 securities companies and five banks, agreed in advance on bidding rates or volumes or agreed to exchange bidding interest rate information, thereby limiting competition in the treasury bond issuance market.

Additionally, the Fair Trade Commission decided to report seven companies, including Mirae Asset Securities, NH Investment & Securities, Industrial Bank of Korea, KB Securities, Kiwoom Securities, Korea Development Bank, and Korea Investment & Securities.

The Korea Financial Investment Association has securities companies, asset management companies, futures companies, and trust companies as its members, and is responsible for maintaining business order among member companies, self-regulation to establish fair transactions, investor protection, policy suggestions, and support for system improvement.

In a press release on this day, the Korea Financial Investment Association emphasized, “Korea Treasury bond dealers have a sense of mission to contribute to the national economy even under difficult conditions, and actively play a role in the process of issuing and distributing government bonds, contributing to the smooth procurement of the national budget.” In this situation, excessive sanctions may be imposed and the role and function of professional dealers may be diminished.

The association was concerned that if professional dealer qualifications were suspended or the designation was revoked, there was a possibility that there would be serious disruption in the issuance of government bonds.

There were also concerns about external credibility. The association announced in April that with Korean government bonds being included in the World Government Bond Index (WGBI) and foreign investment funds flowing in, the heavy sanctions against PD companies will be a major blow to Korea's external credit rating.

The impact on securities firms’ operations was also pointed out. The association judged that fines ranging from hundreds of billions of won to tens of billions of won per company and reports to the Serious Crimes Investigation Office would severely limit the liquidity of securities companies and reduce their business activities. There were also concerns that the global competitiveness of the capital market could decline, including disruptions in new approvals.

The association's position is that the level of sanctions and fines were excessively calculated. The association said, "We plan to actively support the industry to explain the problems of this sanction and the irrationality of the fine calculation through legal procedures such as administrative litigation in the future."

Seong-Yeop Hwang, Chairman of the Korea Financial Investment Association, said, "We sympathize with the need to establish a fair market order, but we are deeply concerned that these sanctions will diminish the role of professional Treasury bond dealers and ultimately cause a burden on national financing and financial market stability." He continued, “We will use this issue as an opportunity to make more efforts to establish a fair market order and strengthen internal control.”

Chairman Hwang added, “We will do our best to ensure stable development of the government bond market and restore trust in the financial investment industry by communicating closely with the government and related organizations.”