Fifteen major South Korean banks and brokerages were found to have colluded on interest rates and volumes in Korean Treasury bond auctions for more than 3 years and were fined more than 1.6 trillion won. The Fair Trade Commission judged that the financial firms shared bid-rate information ahead of competitive auctions or agreed on specific rates, artificially raising the winning yields on Korean Treasury bonds.

The antitrust regulator said on Tuesday it imposed corrective orders and total fines of 1.63 trillion won on 15 primary dealers for unfair joint acts. It also decided to report seven of them.

Those sanctioned were 10 brokerages - Kyobo Securities, Daishin Securities, Meritz Securities, Mirae Asset Securities, Samsung Securities, Shinhan Investment Corp, NH Investment & Securities, KB Securities, Kiwoom Securities and Korea Investment & Securities - and five banks - KB Kookmin Bank, NH Nonghyup Bank, IBK Industrial Bank of Korea, Hana Bank and Korea Development Bank.

According to the commission's investigation, the financial firms agreed in advance on bid rates and volumes, or exchanged related information, in 150 Korean Treasury bond auctions over about 3 years and 6 months from January 2020 to June 2023. In 145 of those cases, agreements were reached on specific bid rates or volumes beyond simple information sharing.

The collusion was carried out through phone calls and messengers. Some firms checked rivals' bid rates until just before the bidding deadline, and were found to have continued the collusion as a practice, such as by writing manuals on how to exchange information by bidding time slot or handing over contact details when staff changed. The commission also confirmed a case in which bid rates were agreed in a 5-second phone call.

The commission judged the acts restricted competition to underwrite Korean Treasury bonds and caused an artificial rise in winning yields. It said Korean Treasury bonds are both a government funding tool and a benchmark for interest rates on other financial products, meaning limits on auction competition also affect the management of public finances.

Fines by company were highest for KB Securities 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 Investment Corp at 147.3 billion won and IBK Industrial Bank of Korea at 135.8 billion won.

The commission decided to report seven firms - Mirae Asset Securities, NH Investment & Securities, IBK Industrial Bank of Korea, KB Securities, Kiwoom Securities, Korea Development Bank and Korea Investment & Securities - to the Major Crimes Investigation Office, citing the long period of misconduct and the large number of auctions involved.

The commission said, "This measure is a case of detecting collusion that continued for a long period in the Korean Treasury bond issuance market," and "We will continue to strengthen monitoring of competition-restricting conduct in the financial sector and bid rigging in public-sector tenders."