South Korea's competition regulator has imposed a record fine of 1.63 trillion won — about $1.2 billion — on 15 banks and securities firms for rigging government bond auctions over more than three years. The Korea Fair Trade Commission (KFTC) announced the penalty on Wednesday, 11 November, saying the firms coordinated their bidding in 150 Korean Treasury bond auctions between January 2020 and June 2023.

In 145 of those auctions, the dealers went beyond sharing information and directly agreed on the yields and volumes they would bid, the regulator said. The firms held 15 of the 18 primary dealer licences then in operation.

How the cartel worked

According to the KFTC, the 15 primary dealers exchanged bidding information by telephone and on the Telegram messaging app, often one or two minutes before auction deadlines. The regulator said the coordination artificially held yields up, raising the cost of government borrowing. The penalty was based on about 54 trillion won of winning bids affected by the conduct, with a surcharge rate of 4.5 per cent applied.

The fine is the largest the KFTC has imposed in a single case, surpassing the 1.03 trillion won penalty levied on Qualcomm in 2016. The regulator said the move should encourage competition in bond auctions.

Biggest fines and criminal referrals

KB Securities received the largest single fine, at 332.2 billion won, followed by NH Investment & Securities at 242.8 billion won and Mirae Asset Securities at 214.8 billion won. Seven firms have also been referred to the Serious Crime Investigation Agency for criminal investigation, including Mirae Asset, NH Investment, KB Securities and Korea Development Bank. The firms can still challenge the ruling in court.