Banks Collude in KEPCO and Korea Expressway Corporation Call Bidding...Fined 1.32 Billion KRW

Fair Trade Commission uncovers violations at 4 banks including Citi, HSBC, CASA, and JP Morgan Chase

Photo by Yonhap News

[Asia Economy Reporter Moon Chaeseok] Four banks, including Citibank Korea, were caught by the Korea Fair Trade Commission (KFTC) for colluding in four currency swap bids conducted by three companies, including Korea Hydro & Nuclear Power and Korea Expressway Corporation.

On the 11th, the KFTC judged that four banks?Citibank, Hongkong and Shanghai Banking Corporation (HSBC), Cr?dit Agricole (CASA), and JPMorgan Chase Bank?had agreed to restrict competition during currency swap bids from January to September 2010.

The KFTC decided to impose corrective orders and a total fine of 1.321 billion KRW on these businesses. Citibank was fined 900 million KRW, HSBC 387 million KRW, and CASA 34 million KRW, respectively. The KFTC stated that the imposed fines may change later depending on the confirmation of related sales amounts.

A currency swap is a financial contract between parties to periodically exchange 'principal' and 'interest on principal' denominated in two different currencies. It is mainly used to convert foreign currency debt into Korean won debt to mitigate the risk of increased repayment amounts when the exchange rate rises (won depreciation).

Data provided by the Korea Fair Trade Commission

According to the KFTC, Citibank and HSBC agreed that HSBC would not participate in a 100 million USD currency swap bid conducted by Korea Hydro & Nuclear Power to convert dollar-denominated bonds issued for nuclear power plant construction funding into won-denominated debt, allowing Citibank to win the bid, and then executed this agreement.

Also, Citibank, HSBC, and JPMorgan Chase Bank agreed on the bid prices so that HSBC would win two currency swap bids totaling 180 million USD conducted by Korea Expressway Corporation to convert dollar-denominated bonds issued for highway construction funding into won-denominated debt, and then implemented this agreement.

HSBC and CASA agreed that HSBC would submit a higher bid price than CASA in a currency swap bid worth approximately 15 million euros conducted by a private company, Company A, to convert euro-denominated bonds issued for operating funds into won-denominated debt. However, both banks failed to win the bid.

A KFTC official explained, "Customers such as Korea Hydro & Nuclear Power intended to select banks through bidding to conclude currency swap contracts at lower won interest rates. However, banks colluded in advance on bid prices and winning banks, which acted as an obstacle to achieving this effect."

The KFTC found significance in detecting and sanctioning bid rigging among major banks during currency swap transactions conducted by domestic public enterprises and private companies such as Korea Hydro & Nuclear Power.

A KFTC official said, "Through this action, we expect to promote price competition among banks in the currency swap bidding market in the future and strengthen internal control measures against illegal acts by frontline sales staff."

Data provided by the Korea Fair Trade Commission

This content was produced with the assistance of AI translation services.