The 16 commercial banks operating in Korea sold derivative products worth 193 trillion won (US$160.99 billion) in 4.91 million transactions over the past five years from 2015 to Aug. 7 in 2019. Among them, 60.40 billion won (US$50.39 million) worth of products sold through 976 transactions caused losses to investors, according to the data submitted by the Financial Supervisory Service (FSS) to Rep. Jae Yoon-kyung of the ruling Democratic Party on Sept. 30. Losses occurred only in 0.2 percent of the derivatives transactions, but the amount of losses was huge.
The sales amount of derivatives products that caused losses to investors surpassed 10 billion won (US$8.34 million) for three banks, including Nonghyup Bank with 17.20 billion won (US$14.35 million), Industrial Bank of Korea (IBK) with 15.50 billion won (US$12.93 million) and Citibank with 14.70 billion won (US$12.26 million).
The figure is expected to grow further in the future as it does not include sales of the controversial derivatives-linked funds (DLFs) by Woori Bank and Hana Bank.
Nonghyup Bank sold derivatives in a total of 371,809 transactions, including 324,702 for equity linked trust (ELT) products, 42,435 for equity linked fund (ELF) products and 4,672 for DLF products. Out of these, it incurred losses on 396 transactions of DLF products.
IBK made a total of 12,808 sales transactions, including 37 for ELF, 1,027 for DLF, 29 for ELT and 11,715 for DLT. Out of the total, it suffered losses on five ELF transactions, 37 DLF deals and 117 ELT transactions.
Citibank sold derivatives in a total of 62,789 transactions, including 60,330 for ELT and 2,459 for DLT. Among them 18 ELT and 115 DLT transactions caused losses to investors. For local banks, Daegu Bank had 14,810 derivatives transactions, with 5 billion won (US$4.17 million) worth of sales causing losses.
Meanwhile, the amount of derivatives sales which cause losses to investors is expected to increase further as 170 billion won (US$141.88 million) worth of DLFs linked to overseas interest rates sold by Woori Bank and Hana Bank will come due by the end of this year. The loss ratio of Woori Bank’s DLF products linked to the interest rate on Germany’s 10-year government bonds which has matured starting from Sept. 19 is up to 100 percent of the principal. The DLF products linked to the U.K. and U.S. constant maturity swap (CMS) rates sold by Hana Bank have started maturing from Sept. 25 and recorded the loss ratio of up to 46 percent. The total amount of DLF products sold by Woori Bank and Hana Bank to be matured this year comes to 170 billion won (US$141.88 million).