NH Investment & Securities, Proactively Compensates 18 Billion Won for Bond Rollover

Unusual Compensation Proceeding for Investment Losses Due to Bond Maturity Mismatch

NH Investment & Securities will proactively compensate corporate clients who suffered losses due to the practice of "bond rollover."

According to the securities industry on the 25th, NH Investment & Securities recently began compensation following an internal judgment that some of the losses caused by maturity mismatches in bond-type wrap accounts were attributable to the company.

Maturity mismatch refers to the situation where short-term funds held in wrap or trust accounts are invested in long-term bonds, causing sudden fluctuations in valuation gains and losses. When clients who intend to manage short-term surplus funds for about 3 to 6 months subscribe to wrap or trust products, some securities firms operate these accounts by including long-term corporate commercial papers (CPs) with maturities of 1 to 3 years and higher interest rates, resulting in a mismatch. The securities industry has traditionally managed assets in this manner, but it has been criticized as an unsound business practice.

The Financial Supervisory Service began on-site inspections of more than 10 major securities firms in July to determine whether there were any unsound business practices.

Meanwhile, the scale of NH Investment & Securities' bond-type wrap and trust accounts is estimated to be between 9 trillion and 10 trillion KRW, with losses estimated at around 18 billion KRW.

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