NongHyup Bank Halts ELS Sales Completely... Other Banks Are 'Still Selling'

Shinhan Bank Suspends Sales of H Index ELS Since November Last Year
Kookmin, Hana, and Woori Banks Have No Plans to Halt Sales

With large-scale losses expected from Hong Kong H-Index-linked equity-linked securities (ELS) in the first half of next year, NongHyup Bank has become the first bank in the sector to suspend sales of ELS-related products. Other commercial banks are still selling ELS and have no plans to halt sales.

According to the banking sector on the 29th, NongHyup Bank stopped selling ELS products at branches nationwide last month. Among equity-linked derivatives, only principal-protected equity-linked bonds (ELB) are currently being sold.

A NongHyup Bank official explained, “Since October, to prevent customer confusion, we have excluded products structured as equity-linked trusts (ELT), which carry increasing risk of losses, from our sales list.”

According to industry sources, the outstanding balance of Hong Kong H-Index-linked ELS maturing in the first half of next year sold by the five major domestic banks?KB Kookmin, Shinhan, Hana, Woori, and NH NongHyup Bank?reaches a total of 8.41 trillion KRW. By bank, KB Kookmin Bank holds the largest amount at 4.7726 trillion KRW, followed by NH NongHyup Bank (1.4833 trillion KRW), Shinhan Bank (1.3766 trillion KRW), Hana Bank (752.6 billion KRW), and Woori Bank (24.9 billion KRW). The underlying asset of this product, the H-Index, has plunged about 40% from the time of sale (average 10,044), making principal losses in the range of 3 to 4 trillion KRW unavoidable.

As the Hong Kong H-Index continues to decline, Shinhan Bank also stopped selling ELS linked to the Hong Kong H-Index starting November last year. However, except for NongHyup Bank, other banks continue to sell ELS-related products and have no plans to stop.

Regarding criticism that high-risk products were aggressively sold to meet branch performance evaluations, the industry maintains that the performance evaluation indicator (KPI) weight for these products is low. A representative from a commercial bank said, “Since only a portion is included in non-interest income performance evaluations, the single weight of ELS is low.” Another commercial bank official also stated, “Because the evaluation weight is low, there are no plans to change the criteria.”

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