OK Savings Bank has incurred a loss exceeding 30 billion won from its investment in single-stock leverage exchange-traded funds (ETFs) linked to Samsung Electronics and SK Hynix. In response, financial authorities are planning to revise regulations on high-volatility ETF investments by savings banks. The current rules do not impose specific investment limits on securities-type ETFs, creating a regulatory gap.
On October 6, the Financial Supervisory Service (FSS) reported to the National Assembly's Political Affairs Committee, indicating that it is considering applying separate investment limits to high-volatility products, including single-stock leverage ETFs.
This review was prompted by inquiries from the office of lawmaker Han Min-soo regarding the losses incurred by OK Savings Bank from its single-stock leverage ETF investments. Among the top five savings banks by assets, OK Savings Bank was the only one to invest in single-stock leverage ETFs based on Samsung Electronics and SK Hynix, with a total purchase amount of 75.6 billion won.
The confirmed losses from this investment reached 26.2 billion won. OK Savings Bank sold its SK Hynix single-stock leverage ETF for 19.73 billion won, resulting in a loss of 20.06 billion won, while it sold its Samsung Electronics single-stock leverage ETF for 12.53 billion won, incurring a loss of 6.14 billion won. Additionally, the unrealized loss on the remaining Samsung Electronics single-stock leverage ETF amounts to 4.16 billion won, bringing the total investment loss to 30.36 billion won as of September 23. This represents 1.9% of OK Savings Bank's equity as of the end of June.
The issue lies in the current investment regulations for savings banks, which do not adequately reflect the risks associated with single-stock leverage ETFs. Existing rules limit savings banks' stock holdings to 50% of their equity and restrict holdings of stocks and corporate bonds issued by the same company to 20% of their equity.
In contrast, securities-type ETFs are classified as collective investment securities, allowing investments up to 100% of their equity. While there are separate limits for collective investment securities, they only apply to real estate, special assets, and mixed assets, excluding securities-type ETFs.
To address this regulatory gap, the FSS plans to consult with the Financial Services Commission regarding amendments to the supervisory regulations for savings banks. Proposed measures include calculating the securities holding ratio based on 'actual exposure' that reflects leverage ratios. There is also consideration of applying the 20% equity limit, currently applicable to stocks and corporate bonds of the same company, to single-stock leverage ETFs.
Lawmaker Han Min-soo stated, "The lack of regulatory limits on leverage ETFs, which carry significantly higher risk, is a clear oversight in supervisory regulations. I will closely monitor the financial authorities to ensure prompt amendments to regulations that could threaten the stability of savings banks and harm depositors."
* This article has been translated by AI.
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